Joseph Otting has been the Comptroller of the Currency since November 2017, but if reports are to believed, Otting is set to leave the OCC as soon as this week.
And in what could be his last official act as leader of one of the nation’s main banking regulators, Otting’s OCC is pressing forward alone with reforms to the Community Reinvestment Act, a federal anti-redlining law.
The OCC announced Wednesday that it has released its final rule on “strengthening and modernizing” the CRA, which requires banks to meet the credit needs of all communities they serve, including low- and moderate-income neighborhoods.
However, the OCC’s final rule doesn’t have the full-throated support of the other two main federal banking regulators, the Federal Reserve and the Federal Deposit Insurance Corp.
The OCC and FDIC have been working together for several years to make changes to the CRA, but Otting’s OCC is now moving forward without the other two regulators to push CRA reforms even as the COVID-19 pandemic continues.
The OCC announced its final rule on the CRA changes Wednesday, but in a statement, FDIC Chairman Jelena McWilliams said the agency supports the rulemaking effort but is not yet ready to sign off on the rule given what’s going on in the country right now.
“The CRA proposal the OCC and the FDIC issued last December was a culmination of a multi-year effort by the prudential banking regulators to modernize CRA regulations for the first time in a quarter of a century,” McWilliams said in a statement.
“While the FDIC strongly supports the efforts to make the CRA rules clearer, more transparent, and less subjective, the agency is not prepared to finalize the CRA proposal at this time,” McWilliams added. “The FDIC recognizes the herculean effort community banks are making to support America’s small businesses and families during this challenging time and encourages financial institutions to work constructively with borrowers affected by COVID-19.”
Despite that, the OCC is pushing forward with the CRA reforms in what could be Otting’s last days at the regulator.
The OCC details all the changes in a 372-page document, which can be read here. According to the OCC, the final rule “makes changes in four areas of the CRA framework,” including (from the rule itself):
Specifically, the final rule: (1) clarifies and expands the bank lending, investment, and services (collectively, qualifying activities or CRA activities) that qualify for positive CRA consideration; (2) updates how banks delineate the assessment areas in which they are evaluated; (3) provides additional methods for evaluating CRA performance in a consistent and objective manner; and (4) requires reporting that is timely and transparent.
The new framework incentivizes banks to achieve specific performance goals; this is in contrast to the previous rule, under which banks received ratings based primarily on a curve compared to their peers’ performance.
Otting also released a lengthy statement outlining some of the rule’s new provisions, but did not address his future at the agency.
“Today, the OCC took an important step forward to strengthen and modernize the regulatory framework implementing the CRA,” Otting said.
“The final rule’s framework will increase support to small business, small and family-owned farms, Indian Country, and distressed areas, and it accommodates banks of all sizes and business models.”
But given that the OCC is pressing forward seemingly alone in its CRA reform efforts, the reaction to the OCC’s plans was less than positive.
“This is an awkward, disjointed and rushed move by a single agency that couldn’t get agreement from the two other agencies that regulate banks within the same administration,” National Community Reinvestment Coalition CEO Jesse Van Tol said. “The OCC should have been able to agree and work with the other two agencies that oversee enforcement of the same law. It couldn’t. It failed. That’s an administrative fiasco.”
Van Tol added: “The timing is shocking, in the middle of a pandemic that has been hardest on lower-income communities this law is supposed to protect. What an insulting and cruel moment to unleash new rules that will in some cases help banks to do less for some poor communities and communities of color. Those are the communities hit hardest by COVID-19.”
David Dworkin, the president and CEO of the National Housing Conference, agrees.
“Banks, regulators and community groups must be singularly focused on responding to this unprecedented crisis, and not on bureaucratic and regulatory diversions that will sidetrack essential resources from the task at hand,” Dworkin said.
But it wasn’t just fair housing groups that expressed doubts on the OCC’s move. Banking groups did too, namely the American Banking Association.
“We remain concerned about key provisions of the final rule including the substance and complexity of the performance measurement benchmarks, which will present significant data collection challenges for banks. The OCC’s decision to collect additional information and perform further analysis prior to setting the performance measurement benchmarks is a positive step at addressing those concerns, but our members still have many questions,” ABA President and CEO Rob Nichols said in a statement.
“We have consistently advocated for CRA modernization that encourages banks to invest efficiently and effectively in every neighborhood they serve. The fact that only one of the three federal banking regulators overseeing CRA has adopted this final rule means it does not meet that goal,” Nichols concluded.
Both Politico and the Wall Street Journal reported Tuesday evening that Otting is about to step down from his position.
When asked about Otting’s status at the OCC, an OCC spokesperson told HousingWire that the agency is not commenting on Otting’s plans.
The OCC hosted a call with reporters Wednesday morning to discuss the CRA changes, but the call featured Brian Brooks addressing the rule, not Otting.
Brooks joined the OCC in March as its chief operating officer and first deputy comptroller.
Brooks and Otting both previously worked at OneWest Bank, alongside Department of the Treasury Secretary Steven Mnuchin.
Mnuchin and his partners at Dune Capital Management formed OneWest after buying the remains of IndyMac Federal Bank from the FDIC in 2009. Mnuchin and his partners sold OneWest to CIT Group in 2015.
Otting served as the CEO of OneWest from 2010 until 2015, while Brooks served as OneWest’s vice chairman and chief legal officer.
Brooks left OneWest in 2014 to become Fannie Mae’s executive vice president, general counsel and corporate secretary, a role he held for almost four years. Brooks left Fannie Mae to become the chief legal officer of Coinbase, one of the world’s largest digital currency exchanges.
And Brooks left Coinbase to help Otting run the OCC.
According to the reports, it’s believed that Brooks will now lead the OCC in Otting’s presumed absence.
