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Wall Street fumes over last-minute rule from Trump bank watchdog

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Wall Street fumes over last-minute rule from Trump bank watchdog 2

By Robert Schmidt and Jesse Hamilton


Were history a guide, Brian Brooks would be spending the last days of the Trump administration enjoying the Washington view from his spacious government office and contemplating his next career move. Instead, the chief overseer of the largest U.S. banks is infuriating Wall Street.

As acting head of the Office of the Comptroller of the Currency, Brooks is expected to pass a rule Thursday that would force banks to lend to gun manufacturers, oil drillers and other controversial industries that some have refused to do business with. Brooks, who plans to step down after he finishes the regulation, has also angered banks by granting federal banking licenses to technology firms, potentially creating a new flock of competitors.

The OCC isn’t alone among federal agencies trying to jam through rules before President-elect Joe Biden is sworn in on Jan. 20. But Brooks’s 11th-hour agenda has been a shock to banks because they’d grown accustomed to getting their way with President Donald Trump’s financial regulators, who have spent much of the past four years loosening post-crisis rules and taking a low-key approach to oversight.

There’s little that can be done to stop Brooks, a situation that has left many firms threatening lawsuits and prompted furious letters to the OCC and critical commentary, like one web post from a leading bank trade association that said the agency was demonstrating “a shocking ignorance of how banking is prudently conducted.”

Brooks, a financial services lawyer and former Fannie Mae general counsel who made millions at a cryptocurrency firm, is clearly relishing the battle. It’s set to be his last fight; Brooks, who likely would have been fired once Biden takes office, announced his departure Wednesday. In an interview last month, he feigned shock at the level of industry opposition.

“Are they angry?” Brooks, 51, asked sarcastically. “If there was some myth that the OCC or my political team are too cozy with big banks, you can put that to rest.”

Remarkable Turn

It’s a remarkable turn for the OCC, which watches over JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and other giant financial companies. The regulator has traditionally been seen as the most industry-friendly of the government’s watchdogs, with Brooks’s predecessor Joseph Otting often referring to banks as the OCC’s “clients.”

Brooks points out that he, too, has helped Wall Street since being installed as acting comptroller of the currency in May 2020. Along with other agencies, the OCC has supported dialing back some of the restrictions born after the 2008 meltdown and tweaking capital requirements to ensure firms could keep lending during the coronavirus pandemic.

But he aggressively defends his actions that have drawn bankers’ ire, chief among them the rule that would guarantee companies “fair access” to banking services. The regulation is partly a response to 2018 announcements from firms, including Citigroup and Bank of America Corp., that they would stop doing business with some firearms makers — decisions that angered conservatives. Other lenders decided not to finance oil and gas companies that drill in the Arctic, prompting outrage from Alaska’s two Republican senators.

Brooks, who first proposed the regulation in November, argues there’s no reason why financially sound businesses should be denied funding for political reasons. He also stressed that he’s not seeking to wrap up an item on Republicans’ wish-list before Democrats take control of Congress and the White House. Underscoring that point, he said banks have been urged to shun Planned Parenthood, an organization frequently in the crosshairs of GOP lawmakers.

“We’re asking, ‘Is there any reason why it should be OK for a bank to boycott an entire legal industry segment?’” Brooks said. “And if there is, I haven’t heard it.”

Hunting Magazine

The OCC has spent recent weeks going through thousands of comments it received on the proposal, most of them from gun enthusiasts applauding the plan. The high public interest is likely attributable to Brooks himself. He has publicized his effort through speeches, interviews and op-ed articles. Bank lobbyists on the other side of the debate have been watching with a mixture of horror and fascination, emailing around some of Brooks’s greatest hits.

There was his article in Game & Fish magazine — likely a first for an OCC chief — that argued banks are harming hunters by “suffocating” gun manufacturers’ capital needs. “We can’t rely on all bank executives to be as strong and courageous as American sportsmen,” Brooks wrote.

For their part, bankers bristle at the prospect of government overseers telling them who they must lend to. They also argue that enacting such contentious policies so quickly sets a dangerous precedent, overturning long-time bank rules with little chance for interested parties to weigh in.

Brooks set a 45-day period for public comments, which the industry said was way too short — leaving less than two weeks for the OCC to review arguments from lenders and Democratic lawmakers who oppose the rule.

“It’s the wrong place to have this debate at an independent agency,” said John Court, the general counsel of the Bank Policy Institute, a trade association of large and mid-sized lenders whose members include JPMorgan, Citigroup, Bank of America and Wells Fargo. “It should be done by Congress.”

Keyboard Playing

Among bankers, perhaps the most popular Brooks appearance was a question-and-answer video he did at a prominent Washington attorney’s home. While there was much discussion about the OCC’s work, Brooks and the lawyer, Thomas Vartanian, hopped up on a stage at the end of the meeting and jammed out a Billy Joel tune. The acting comptroller plays keyboards and takes the lead vocal. Lobbyists have flooded each others’ inboxes with emails mocking the performance, evidence of how acrimonious the relationship between Brooks and the financial industry has become.

The other OCC policy that troubles large lenders has been his push to award bank charters to financial technology firms. Brooks encouraged the companies to apply, earning him praise as the “first fintech comptroller” from corners of the tech world. In July, Varo Bank became the first fintech company to be granted a full-service charter, followed by Social Finance Inc. in October. Just this week, Anchor Digital Bank became the first cryptocurrency firm to receive a charter.

The OCC is likely to be sued over the fair access rule, bank lawyers said. In addition, with Democrats soon to be in control of both the White House and Congress, there’s a good chance it could be overturned. One avenue to thwart the regulation would be to use the Congressional Review Act, which allows lawmakers to scrap recently enacted policies with a majority vote.

Biden’s Comptroller

Biden’s comptroller could also seek to roll back or slow down Brooks’s actions. While the president-elect has yet to announce a replacement, people familiar with the matter say that former Treasury Department official Michael Barr and University of California at Irvine law professor Mehrsa Baradaran are the two finalists for the post.

Senator Sherrod Brown, the Ohio Democrat who will run the Banking Committee, welcomed word that Brooks is leaving.

“He was starting to do damage there with a number of things he did,” Brown told reporters on Tuesday. “I’m thrilled that those days are going to be behind us.”

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