WASHINGTON - The turnover of veteran banking supervisors continued Monday as Richard Spillenkothen announced he will retire June 30 after three decades with the Federal Reserve Board, the last 15 years as its director of supervision and regulation.
Many of the likely candidates to succeed him have left the Fed in recent years, and his current deputy, Stephen M. Hoffman Jr., is scheduled to join the Federal Reserve Bank of San Francisco in June as its lead supervisor.
"It's a disruptive thing to lose one person - a much bigger deal to lose two," said Oliver Ireland, a partner at Morrison & Foerster LLP and a former Fed attorney.
Turnover is affecting all the agencies, and not just in supervision roles. Among the leaders of the four agencies, Comptroller of the Currency John Dugan has the longest tenure, and he was only sworn in Aug. 4. His top cop is Wayne Rushton, who joined the agency in 1965 and is now 63. People who know him have been expecting him to retire for several years.
The agency has lost key supervisors to Bank of America Corp., KeyCorp, and HSBC North America.
The Federal Deposit Insurance Corp. lost its lead supervisor in August, when Mike Zamorski stepped aside. Since he has since left the agency, and there have been two acting directors. A permanent head is not expected to be selected until a new FDIC chairman is in place.
Within the Fed's supervision division, key departures include Herbert Biern, who left in May to join ABN Amro Holding NV; Steve Schmering, who retired; and William A. Ryback, who left in 2003 for a supervisory job in Hong Kong.
"It's an important time with the changeover in the heads of the agencies and the supervisory staff," said Richard M. Whiting, the executive director of the Financial Services Roundtable and a former Fed lawyer. "An increased focus must be maintained on the supervisory process. … It's a time to be vigilant."
"We're going to feel it as time goes on," said one former regulator. "As supervisors with 15 years of experience replace those with 30 years the industry is going to feel it, whether it's the next time we get in trouble or when we have to implement a complicated regulation like Basel II."
Of course, all the agencies have plenty of staff members with solid experience, but the people who are leaving have been battle-tested, supervising through the savings and loan crisis and the wave of banks failures that followed.
Mr. Spillenkothen, 56, joined the Fed in 1976 and was promoted to supervision director in 1991. He is the second-longest-serving head of supervision. Mr. Hoffman, also 56, announced his plans to move west several weeks ago. He is not expected to shift gears and succeed Mr. Spillenkothen.
The other obvious candidate in the division is policy guru Roger Cole, but sources said he would not want the job. Mr. Cole did not return a phone call, and a Fed spokesman would not discuss potential successors.
Source said the Fed could pick someone from the 12 Federal Reserve banks, and speculation naturally shifted to the New York Fed, because its supervisors oversee many large, internationally active banks. The head of supervision there is William L. Rutledge, who is also 56 and joined the Fed in 1974. He took his current job in 1999. Above him is another veteran, first vice president Christine Cumming, but a number of sources said neither is likely to view Mr. Spillenkothen's job as a promotion.
Some sources said they thought the Fed might go outside the agency to find a successor steeped in risk management and well versed in global banking issues. But others said that was unlikely.
"With the bench that the Fed has and the esprit de corps, it would be better if it [the hire] were inside," said H. Rodgin Cohen, the managing partner of the law firm Sullivan & Cromwell LLP.
Gil Schwartz, a former Fed staff member and now a partner with the Washington law firm Schwartz & Ballen LLP, noted that Mr. Spillenkothen succeeded his mentor, Bill Taylor, who had succeeded his mentor, Jack Ryan. The same phenomenon has occurred in the legal department, where at least the last three general counsels had been deputies to their predecessors.
Sources said Mr. Spillenkothen's departure has nothing to do with the fact that Ben Bernanke just took over as the Fed's chairman. Sources said the board member likely to play the biggest role in selecting a successor to manage the 257-person staff would be Governor Susan Bies, who chairs the board's bank-supervision committee.
Mr. Spillenkothen has not said what he will do next.
He is widely respected as a career government servant who was accessible and open to input from outsiders. He is credited with quietly keeping the largest banks on a short leash and demanding they keep capital levels high. He played a key role in writing the original Basel capital accord and in implementing the Gramm-Leach-Bliley Act of 1999, which put the Fed in charge of the newly created financial holding companies.
