WASHINGTON — Michael Hsu has led the Office of the Comptroller of the Currency for over three years without being nominated for the permanent job, an arrangement that is unprecedented in its duration.
But some experts say it may also be an indicator that banking regulatory positions are more difficult to fill than they used to be because of heightened partisanship between parties and significant political disagreements even among members of the same party.
Todd Baker, managing principal at Broadmoor Consulting and a senior fellow at Columbia University, said the high value of Senate floor time, the OCC's unique appointment structure and Hsu's own political baggage go a long way toward explaining Hsu's long term as acting Comptroller.
"Michael Hsu has been an outstanding Comptroller, and it is a great pity that his appointment has not been made permanent," Baker said. "It is not clear how the politics shake out here, as the GOP has criticized him for his role in the removal of Jelena McWilliams as [Federal Deposit Insurance Corp.] leader and for some of his regulatory actions and some factions of the Democratic party consider him too moderate on bank regulatory matters in general."
Hsu became Acting Comptroller of the Currency in 2021 after being appointed as the first deputy comptroller by Treasury Secretary Janet Yellen. Hsu appears to be the longest acting comptroller on record,
Hsu, a Democrat, has faced political headwinds from both sides of the aisle. His perceived
He has also faced criticism from progressive Democrats. Senate Banking Committee member Senator Elizabeth Warren has criticized Hsu for what she sees as his too-permissive attitude toward bank mergers during his career.
Baker said polarization also has seeped into financial regulation, which could mean Hsu probably isn't the last long-term acting comptroller regulators are likely to encounter.
"His situation is unprecedented — although other comptrollers, such as Brian Brooks under Trump, have had relatively long acting terms," he said. "The recent spate of 'acting appointments' is a problem stemming from the increasing politicization of bank policy, reflecting both ideological disagreements and an overall lack of comity in Congress and politics in general."
Davis Polk lawyer Meg Tahyar said that kind of political pressure obscures what should be the most important consideration for lawmakers when mulling a potential regulatory appointment, which is whether the nominee is competent and capable of running their agencies.
"The irony of it all is that Mike has been doing a great job," Tahyar said.
There is some precedent for administrations to keep jobs vacant because of difficult political headwinds. The passage of the Dodd-Frank Act in 2010 created a Vice Chair for Supervision at the Federal Reserve, a position that President Obama never nominated anyone to fill. Federal Reserve Gov. Daniel Tarullo, who chaired the Fed's supervisory committee, served as de facto Vice Chair for Supervision for much of the administration, but the position was only finally filled for the first time by President Trump in 2017 with the confirmation of Randal Quarles.
One reason that Comptrollers of the Currency are harder to confirm is because the agency's unique statutory language makes it easier for an administration to appoint someone as an acting comptroller indefinitely than it is to nominate someone for the role permanently.
Former Acting Comptroller of the Currency Keith Noreika said the comptroller post is not constrained by the usual limitations on temporary appointments as outlined in the Federal Vacancies Reform Act of 1998. This allows an acting comptroller to serve with full authority indefinitely.
"Normally under the Vacancies Act, the person [nominated for Acting Chair] has to either be the second in command and an employee of the agency for 90 days, or it has to be a Senate confirmed person from some other position," Noreika said. "Then there would be a time limit on that as well."
None of those requirements apply to acting comptrollers, however. Instead, Noreika said, two provisions of the National Bank Act — which, according to interpretations from the Office of Legal Counsel override the Vacancies Act — give the acting comptroller full powers of the office, including full FDIC board membership.
"The acting comptroller job is set forth at one of the initial provisions of the National Bank Act establishing the Office of the Comptroller that allows the Secretary of Treasury to designate like four or five deputy comptrollers," he said. "And to name one of those deputies the statutory 'First Deputy Comptroller' who, under a separate provision of the National Bank Act, may act with the full powers of the office when there is no Senate confirmed Comptroller of the Currency."
Noreika said another incentive is that acting comptrollers can set their own pay, potentially much higher than a Senate-confirmed appointee. The Comptroller of the Currency's salary is determined by the Executive Schedule, a compensation arrangement that places executive appointees within different bands of compensation depending on level of responsibility. The Comptroller of the Currency is a Level III in the Executive Schedule,
"The OCC itself is not on the government pay scale," he said. "A lot of the senior staff make more than the Comptroller himself, whose pay is actually set by statute."
During his time as acting comptroller, Noreika said he had to set his own pay because he was not a prior OCC employee. He chose to pay himself $130,000, less than the Senate-confirmed comptroller's salary, which he estimated was about $170,000 at the time. However, he says, the acting comptroller's salary could theoretically be much higher.
"The other acting comptrollers after me — and there's been a couple — probably have had their own ways of how they've determined what their own pay is, [but] it could be … substantially more than what the Senate-confirmed comptroller gets," he said. "That wasn't a huge consideration for me … but it could mean more to others who have been in the government a longer time."
These factors, he said, provide even less incentive for the Senate to confirm a permanent comptroller, particularly in a Democratic administration where there are vastly different views within the party on what the correct banking policy is.
"You get all the powers of the office, [you might] theoretically get paid more, and [a confirmation process] would waste time on the Senate floor," Noreika said. "It just becomes a set of priorities — for both the administration and the Senate — of whether they want to waste time to nominate somebody and have them Senate confirmed, when, as long as the person doesn't mind having the word acting in front of their title, they have all the powers of the office."
