OTS chief doesn't expect quick financial overhaul

AP News
Posted: Nov 24, 2009 4:54 PM

A top bank regulator is throwing cold water on a financial overhaul plan the Obama administration wants to see passed quickly.

The Office of Thrift Supervision is not preparing for a possible merger with another regulator, and is looking to hire 40 entry-level bank examiners "in the next 12 to 14 months," its acting director John Bowman told reporters Tuesday.

Under the Obama plan, the OTS would be merged with the Office of the Comptroller of the Currency. The House is debating a similar proposal. A draft bill in the Senate being marshaled by Christopher Dodd, D-Conn., would further consolidate regulators.

None of the proposals would preserve the OTS. The administration has declined to make Bowman the permanent director or to nominate someone else.

OTS regulates national savings and loans _ which must have at least 65 percent of their lending in mortgages and other consumer loans. That made them especially vulnerable to the housing downturn. The agency oversaw some of the largest institutions to collapse during the financial crisis, including Washington Mutual, Countrywide and IndyMac.

OTS also has taken a large share of the blame for the failure of American International Group Inc. The government has committed up to $180 billion to rescue AIG, more than for any other company. OTS regulators failed to accurately predict what would happen to AIG's so-called credit default swaps _ a form of insurance _ if housing values collapsed.

Critics in Congress and elsewhere have said banks chose to be regulated by the OTS because of its reputation for lax oversight.

But Bowman said Tuesday he believed some in Congress understood his concerns and his contention that consolidating regulators would not have prevented this crisis, and will not prevent the next one.

Earlier in the debate, "we were entirely blamed for the financial crisis," he said. "There are now other regulators that are getting that bright spotlight focused on their efforts."

Members of the Senate Banking Committee have ramped up attacks on the Federal Reserve, charging that it failed to exercise its oversight of consumer finance issues.

Bowman emphasized repeatedly that no bill has been passed.

"The House has yet to pass a piece of legislation dealing with the issue definitively, and the same is true with the Senate," he said.

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