WASHINGTON — Comptroller of the Currency Thomas Curry attempted to dispute the notion that large banks are "too big to jail," telling a group of state attorneys general that his agency can take legal action and level "severe penalties" against an institution.
"As important as they are, they should not be considered immune from prosecution when circumstances warrant," Curry said Tuesday before the National Association of Attorneys General. "No institution should be viewed as too big to prosecute."
Both Curry and Consumer Financial Protection Bureau Director Richard Cordray flexed their enforcement power muscles before the AGs during a rare public discussion between the two regulators.
"We would like to work with you to address some of the broader practices and market dynamics that I will discuss today," said Cordray, noting deceptive marketing practices, debt traps and roadblocks to third parties such as servicers as key focus areas. "Accordingly, they form some of our top priorities for enforcement and for application of our other authorities, such as supervision and regulation."
For their part, the attorneys general warmly welcomed Cordray, a former Ohio AG, as the man "who needs no introduction" despite that there's a lawsuit involving 11 AGs against the Dodd-Frank Act, which created the bureau he now heads.
Curry's agency, meanwhile, was criticized by at least one AG who said that, before Curry took office, the OCC had acted in a combative manner with states.
"This has been a historic event for attorneys general in the sense that for a long time, we had a very troubled adversary relationship with the comptroller of the currency," said Iowa Attorney General Tom Miller. "One of the priorities of the comptroller … was to stop state AGs from enforcing consumer laws at national banks. And that produced some very, very bad results and obviously a relationship that was very troubled."
In his remarks, Curry stressed that under his leadership, the OCC was focused on working with attorneys general and other regulators like the CFPB and Justice Department in taking enforcement actions against banks.
He also assured AGs that the while the OCC cannot prosecute criminal cases like the Justice Department, it does have the ability to pursue legal action and penalties for banks that harm consumers.
Sen. Elizabeth Warren, the founder of the CFPB, criticized Curry and other regulators two weeks ago for being reluctant to take banks to trial, saying the agencies should make an example of firms in order to spook other institutions. Other critics have also said the OCC is too quick to settle with firms.
But Curry said that sometimes existing enforcement actions are tough enough.
"There is a tendency among some to automatically dismiss any enforcement action we take against a large institution as insufficiently severe, but that criticism misses the mark on several points," Curry said, stressing the OCC's main focus is to pursue remedial action through a consent order, allowing the bank to fix the problem first. "But let me be very clear: while most of our enforcement actions are resolved by settlement, we are prepared to litigate those actions if the bank or thrift refuses to consent."
Curry did, however, acknowledge that bankers seldom challenge a regulatory consent order, because they are "well aware" of the legal consequences.
"Of course, that leaves open the question of whether more financial institutions should be brought into court more often," he said. "That is, should we be seeking even more severe penalties that are less likely to result in consent orders and more likely to lead to actions before an administrative law judge? Or should more actions be taken by the Department of Justice based on referrals from any of the bank regulatory agencies or the department's own investigative work?"
Curry responded to his own questions by saying that "no one should shrink from such actions when necessary." He noted the HSBC agreement, in which the OCC issued a $500 million civil money penalty against the company for deficiencies with the Bank Secrecy Act.
The $1.9 billion in total penalties among regulators was the largest any federal banking agency has ever assessed. (Critics have asked, however, why the company did not face criminal prosecution.)
Curry also argued against the notion that the agency has not taken more actions against individuals who may have committed the wrongdoing at a bank.
"In virtually every case where we take an action against an institution, we also conduct a parallel review for possible actions against responsible individuals, and we take such actions where they are warranted and where they are legally supportable," he said. "We stand ready to work with you and other federal and state regulatory and law enforcement agencies to help meet our common goals."