Curry’s exit heralds end of Obama-era supervision

WASHINGTON — The Trump administration’s formal ouster of Comptroller of the Currency Thomas Curry, an Obama appointee, has set in motion a sea change atop financial regulatory agencies that will likely unfold slowly over the next year, if not longer.

Treasury Secretary Steven Mnuchin Wednesday appointed Keith Noreika, a longtime D.C.-based corporate lawyer, to serve as first deputy comptroller of the currency. Mnuchin said Noreika would take over as acting comptroller on Friday, compelling Curry’s departure.

Though Curry’s term expired April 9, many previous comptrollers have stayed on the job pending the confirmation of a successor. And while some comptrollers have departed sooner, leaving the first deputy comptroller to act in their stead, that is usually an existing member of staff, not an administration appointee.

Regardless of the novelty of the tactic, observers say the move is the beginning of a yearslong shift in personnel atop the federal financial regulators. Many in the industry see it as a net positive.

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“This is the Trump administration’s long-awaited first step, albeit small, toward replacing Obama administration bank regulators,” said Ian Katz, an analyst with Capital Alpha Partners. “There will be many more.”

Noreika graduated from Harvard Law in 1997 and almost immediately began working at the corporate law firm Covington & Burling in 1998 as an associate. He was made partner in 2005, focusing on financial regulatory issues, litigation and mergers and acquisition. Among his more notable roles was engineering the $16.8 billion merger of Mellon Financial Corp. with Bank of New York Company in 2007 and advising the Treasury Department on the Troubled Asset Relief Program. He joined Simpson Thacher last August and more recently served as lead regulatory attorney for Ant Financial’s acquisition of MoneyGram.

The administration’s critics have taken notice, with Sen. Sherrod Brown, the lead Democrat on the Senate Banking Committee, knocking Curry’s ouster as a further example of the Trump administration eroding the regulatory safeguards put in place since the 2008 financial crisis.

Marcus Stanley, policy director for Americans for Financial Reform, said Curry's departure — itself a somewhat unusual circumstance — puts the controls of a critical supervisory agency in the hands of a bank-friendly administration.

“This is where they’re really getting their hands on the controls,” Stanley said. “The combination of head of the OCC and [Federal Reserve's] vice chair for supervision, those are really the two crucial positions as far as risk controls at the 'too big to fail' banks. It’s seems like they put unusual pressure to push Curry out.”

Jaret Seiberg, managing director of Cowen Washington Research Group, said in a research note that the move is exactly the kind of thing that can counteract some of President Trump’s more populist statements in recent weeks, including suggestions that he may break up the biggest banks.

“This is the most bullish sign yet for the biggest banks that the Trump administration will pursue a traditional Republican approach of financial regulation rather than adopt a more populist tone that could include high leverage capital requirements,” Seiberg said.

Seiberg added that both Noreika and Joseph Otting — the administration’s purported pick to be the permanent comptroller — would bode well for large and midsize banks. They can expect a receptive audience if they push to ease limitations on leveraged loans, he said, while midsize regionals will likely gain traction if they seek to reduce the capital requirements for commercial real estate and pursue mergers.

Katz said the move makes sense in part because it may take quite a while for the Senate to confirm President Trump’s nominees — most of whom have not yet been named. Otting, a former executive at OneWest alongside Mnuchin, will likely face tough scrutiny from Democrats along the same lines as Mnuchin if and when he is formally nominated. Noreika’s ascension means there will be a business-friendly placeholder until that confirmation is complete, by which time other nominees will presumably be taking their seats as well, he said.

“The new personnel will gradually craft a more bank-friendly approach,” Katz said. “Over the next 18 months we will see new regulators who will loosen some of the regulations that banks have been groaning about the past several years. It won’t happen quickly, but it will happen.”

Another likely casualty of Curry’s ouster is any real expectation that the OCC’s work on developing a fintech charter will adhere to a high standard for consumer protection. The charter, unveiled in a March guidance document, would allow fintech firms to apply for a limited charter to nonbanks engaged in “banklike” activities. States have since sued the OCC over the charter, arguing that it exceeds the agency’s authority, while Curry defended the charter by saying that the business of banking is fluid and regulators have to change with the times.

Stanley said that public advocates had been skeptical of the idea of a fintech charter, fearing that it might be used as a way around state anti-usury laws or interest rate caps. Curry had made it clear that recipients of a fintech charter would adhere to the highest standards.

“Now what’s going to happen?” Stanley asked. “This is why you have to be careful before you go down this road of just handing out bank charters willy-nilly.”