It sounds like common sense - lead examiners should not be allowed to accept job offers from the banks they oversee.
But the Office of the Comptroller of the Currency has concluded that it does not have the authority to restrict the employment opportunities of its examiners, and it has been unable to persuade the Office of Government Ethics to do so.
So on Thursday, Comptroller of the Currency John D. Hawke Jr. took to the bully pulpit, urging lead examiners to observe a yearlong "cooling-off period" before accepting a job at a bank the examiner had supervised.
"Examiners interested in protecting the reputation of the OCC, as well as their own reputations, would want to avoid such situations," Mr. Hawke wrote in a memo to employees. "By heeding these considerations in their own contemplation of post-OCC employment," examiners-in-charge "would help to ensure that the OCC's reputation for conducting its bank examinations impartially and objectively is maintained."
In an interview Thursday, Mr. Hawke said his agency had considered a formal rule four years ago but shelved it in the face of regulatory obstacles, and now he wishes he had pushed harder for the rule.
"If we had done it four years ago we might have avoided the problem that we've got," he said.
That problem is the OCC's supervision of Riggs National Bank, which hired its examiner-in-charge, R. Ashley Lee. (The Washington bank was fined $25 million for lax money-laundering controls and is being acquired by PNC Financial Services Group Inc.)
"The natural tendency is for people to say 'A-ha, that's the explanation,' " Mr. Hawke said. "The juxtaposition of those two factors, I think, was enormously damaging - it was damaging to us, it was damaging to Ashley Lee, and it was damaging to the bank."
A hiring ban would have prevented the appearance of a conflict of interest, but "I don't think it would have changed the way we supervised Riggs," he said.
The Office of Government Ethics is responsible for defining and limiting conflicts of interest among executive-branch employees.
Mr. Hawke said the office raised objections to a rule specifically barring lead examiners from taking jobs at the banks they examine for one year.
The office "didn't think it was appropriate to do this, at least in the form that we had been proposing to do it," he said. "There is a strong desire in the government to have ethics rules uniform throughout the government."
A spokeswoman for the Office of Government Ethics said it does not have wide latitude in governing the conduct of employees once they leave the government.
Federal law does spell out some restrictions, but "we don't have authority to supplement it," the spokeswoman said. "We interpret it, but we can't do anything further in imposing limitations."
Jan Witold Baran, who heads the government ethics practice at Wiley Rein & Fielding LLP in Washington, agreed.
"I think it would be deemed to be a pretty substantial new prohibition that, if warranted, would have to be imposed by an act of Congress and not simply by an administrative regulation," he said.
Mr. Hawke said his decision to use moral suasion had as much to do with timing as the law.
"We could have injected this into the interagency process and had months and months of discussions and negotiations about how we could fine-tune it - and that is still certainly a possibility," he said. "But in the wake of Riggs, I thought it was essential that we get out quickly and definitively and have an expression of opinion on this so that we can avoid the kind of injury that everybody suffered."
He said he supports legislation to impose a ban being sponsored by Sens. Norm Coleman, R-Minn., the chairman of the Senate's Permanent Subcommittee on Investigations, and Carl Levin, D-Mich., the panel's ranking Democrat. Last month the committee produced a report on Riggs' violations of the Bank Secrecy Act and held a hearing exploring possible solutions.
Mr. Hawke made it clear that the hiring ban extended only to the bank at which the examiner was in charge, and that having former examiners on the staff of other banks is frequently in the OCC's interests.
"I don't think banks make offers to our examiners thinking it is either a reward for prior complicity or to undermine the process," he said. "I don't think they focus on the appearance issue, because they have an opportunity to hire someone who is demonstrably excellent, and they want them to help the bank."
The most recent example of a bank hiring its lead examiner was in March, when LaSalle Bank in Chicago hired Leonard E. Wiatr.
