John Walsh is unplugged. For the first time in seven years, he doesn't work for the government and doesn't have to toe any lines.

The man who led the Office of the Comptroller of the Currency on an acting basis for the 20 months following enactment of the Dodd-Frank Act has plenty of opinions about how implementation is going and how well the reform act is likely to work.

Barbara A. Rehm

Asked whether he thinks the Financial Stability Oversight Council — the umbrella agency created by Dodd-Frank to sniff out systemic risk — will be able to prevent the next crisis, Walsh reveals his biting wit.

"I would love to think that FSOC, the next time around, will have a meeting and catch the crystal just before it hits the cement floor, but I don't think so. I think they'll come with a broom and sweep up the debris."

If it were up to him, Walsh would have done some fundamental reforms differently, including, surprisingly, a single federal regulator for banking. He recalls the debate in the Senate, when the law was still being shaped and he was Comptroller John Dugan's chief of staff.

Then-Senate Banking Committee Chairman Chris Dodd wanted a bolder approach to regulatory reform than the House or the Obama administration. He preferred not just a melding of the Office of Thrift Supervision into the OCC, but a comprehensive consolidation of the agencies. Breaking with his counterparts at the other agencies, particularly the Federal Reserve Board, Walsh was on board, calling it "something worth dying for."

"It really doesn't make a whole lot of sense to me for the FDIC, the OCC and the Fed to debate and debate and debate what banking policy ought to be," he says. "We ought to be able to put that together."

"And I say that knowing that the people at the OCC would have hated it. But the fact that DHS [the Department of Homeland Security] was a train wreck, I don't think can forever be the reason not to reorganize anything else."

Walsh stands out because he is not afraid to tell you exactly what he thinks. And he's been at the policy game a long time.

He holds a master's degree in public policy from Harvard, was a Peace Corps volunteer and did a stint at the Treasury Department before working on Capitol Hill from 1986 to 1992. That gave him a front-row seat to crisis legislating during the S&L meltdown. He left government in 1992 to join the Group of 30, a who's who of international economic and financial gurus. He became its executive director in 1995 and left 10 years later to help former Hill colleague Dugan run the OCC. Dugan's term as comptroller expired in August 2010 and the president asked Walsh to run the agency on an acting basis while he searched for Dugan's successor.

The search took nearly two years and Tom Curry took the OCC helm in April.

Walsh, 61, retired from the agency this month.

"Having been acting, I just couldn't see staying there," he says. "That was about me. Tom [Curry] was as gracious as he could be."

Curry hardly had time to settle into the job before JPMorgan Chase's trading mess exploded and then HSBC's money-laundering problems hit the headlines. He faced some uncomfortable trips to congressional witness chairs and was pressured to promise he would improve the agency's culture.

Over two lengthy interviews, I got the sense Walsh would have reacted differently.

While he agrees any organization can benefit from taking a good, hard look at itself, he says, "I do not believe the OCC needs a change in culture … I absolutely do not think that at all. It is a sound organization. It has dedicated folks; they are extremely smart. They understand very well how to do what needs doing and I think to the extent that there were things that were missed they will retool and make sure they get at those things more forcefully."

People inside the OCC may have wished Curry had said the same thing. There are concerns his mea culpas to Congress are undercutting the agency's morale. I asked Walsh if he thought that was the case.

"If you rock a boat enough and everyone is throwing up, yes, there is always that risk," he says.

But speaking of Curry directly, Walsh says, "His persona inside the agency, and I've said this many times, is he is a nice guy. He is basically a nice guy. He is a longtime supervisor and he understands a lot about the mechanics of supervision, the logic of supervision. He's not some ideologue with hard edges and sharp elbows. It would be surprising to me if a person with that kind of approach and personality were to start roaring around, breaking china all over the place."

Still, insiders were shocked when Curry nudged the agency's long-serving top staffer, Julie L. Williams, into retirement. If Williams, who also has been acting comptroller twice, is expendable, other senior staff wonder if they are, too.

Walsh was unwilling to second-guess Curry on this, but says Williams "will be tough to replace. She was not only a terrific lawyer, I think she was a fantastic public servant. The woman works like a maniac and is smarter than everyone else."

Walsh's defense of the OCC goes deep. He gets downright prickly when asked about the perception that the OCC is too close to the banks it oversees and isn't moving fast enough to correct the problems it spots.

"The question every time something doesn't happen the way people want — 'Why didn't you do something sooner?' — is like asking when did you stop beating your wife. It's the question you can never answer. You can't, and probably shouldn't, defend yourself against the charge."

Walsh thinks the OCC is underappreciated.

"There is a tremendous amount of enforcement, penalties and remedial programs being put in place. Multiple cease-and-desist orders put on many large banks. I think it's probably unprecedented," he says. "So while in each individual case, you can ask why not more, why not different, why not sooner, why not better, the cumulative effect of what's gone on certainly does not seem consistent to me with an agency that is not about making these banks straighten up and fly right."

Walsh does not think Dodd-Frank has consigned the OCC to second-fiddle status, behind the Fed and the Federal Deposit Insurance Corp. "The expectations of supervisors were raised across the board," he says. "I think the OCC has maintained the role that it had before. The question will be over these coming years … does the OCC maintain that position or have it whittled away."

Walsh also bristles at the complaints of community bankers that the OCC caters to the largest banks.

"It is absolutely not the reality of working life for our employees," he says. "The simple fact is that the vast majority of our staff, the vast majority of our work is all about community banks. That is the bread and butter of the agency. It is what earns the paychecks for most of our employees."

Turning back to Dodd-Frank, Walsh worries policymakers are trying to wring too much risk and complexity out of the financial system. While it's important to prevent the next crisis, he says it's equally important to ensure economic growth.

"We can go too far in the direction of safety," he says. "Are we looking for a financial system in which there is no chance of a bank failure or market malfunction? If so, it is going to be a very different, much more constrained system than anything we've ever had."

Walsh also isn't convinced that the largest banks are too big to manage.

"I don't necessarily think they are, but I don't say that as any particular defense of any-size bank. The test has to be can they do it?"

Walsh looks at all the things that have gone wrong in big banks — Libor, errant trading, mortgage discrimination, deceptive marketing — and says all those missteps were avoidable. "If people were misreporting numbers into the Libor process … that's not because they were too big," he says. "People have gotten a lot of things wrong, but I am just not convinced that's because they can't get them right."

That said, Walsh does think the largest banks have hit a wall in terms of size. "It's hard to imagine consolidation and growth at the top," he says.

In fact, pieces of Dodd-Frank, in particular the living wills, are likely to prod banks to reorganize, he says. "I am not sure they will get smaller, but I would like to think they will get smarter."

By smarter, Walsh means he expects banks will rationalize spider webs of subsidiaries and better integrate companies they have acquired.

But he does not think regulators should use living wills to force divestitures — a power Dodd-Frank conveys on the Fed and FDIC.

"In things like looking at the structure of a firm, I think regulators have to be cautious and humble about the idea that they would know better how a company should be structured," he says.

Regulators, however, do have a duty to implement Dodd-Frank as efficiently as possible, Walsh says.

"There is that challenge of adjustment to what the new normal will be and how banks will make money. That is not for regulators to say. Our job is to get the new rules in place and get things set up and let people start adjusting to it," he says. "The magic of the marketplace is it sort of figures out ways to do things."

Walsh says he has no intention of writing a book about the crisis or its policy aftermath. "I don't like to read those books, so I'm not going to write one."

He's toyed with the idea of "creating the next Promontory [Financial] to give [former Comptroller Gene] Ludwig a run for his money.

"Promontory is so big in that space that it almost needs some competition. I don't say that critically of Promontory, but they meet themselves coming and going in some of the big banks."

But Walsh really just wants to do several things part time.

"I'm thinking of consulting, speechmaking, think-tanking, that sort of thing."

Barb Rehm is American Banker's editor at large. She welcomes feedback to her column at Barbara.Rehm@SourceMedia.com. Follow her on Twitter at @barbrehm.

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