WASHINGTON — Sen. Elizabeth Warren, D-Mass., is pressing the Federal Reserve and the Office of the Comptroller of the Currency to more carefully scrutinize New York Community Bancorp.
The OCC in particular, Warren said, should impose an Individual Minimum Capital Ratio on the bank, making use of an obscure tool that could nonetheless heighten capital requirements for the beleaguered institution.
"In order to protect the banking and financial system, it should do so as quickly as possible," Warren said in the letter, sent Wednesday.
NYCB teetered earlier this year and
The problems NYCB faces, Warren said, are exacerbated by two "wrongly approved" acquisitions: Flagstar and many of the assets of the failed Signature Bank.
"Given the ongoing threats from regional bank failures, we are deeply troubled by your failure to answer our previous questions—and your inability or unwillingness to rein in unruly banks," she said.
Warren said NYCB restructured its plan to buy Flagstar in 2022 after the Federal Deposit Insurance Corp. had issues with some aspects of the deal. Flagstar converted from a federal savings bank, under FDIC oversight, to a national bank regulated by the OCC, and Warren said, citing reporting from Capitol Forum, that the OCC approved the merger without addressing the risks raised in the initial FDIC review.
She cited concerns with the new leadership of the bank, specifically Otting and Mnuchin, two former Trump administration regulators who also worked at
"Allowing NYCB to evade penalties under these circumstances would be a dereliction of duty and would represent a failure by the OCC and the Fed to ensure the safety and soundness of the banking system," Warren said. "This lapse in supervision would be especially concerning considering that NYCB is run by former OCC Comptroller Joseph Otting and former Treasury Secretary Steven Mnuchin, who have a prior history of 'widespread misconduct' in managing failed bank OneWest —history that should have been scrutinized by the OCC and the Fed pursuant to their statutory mandate to review changes in bank control."
Warren said the OCC has existing authority to impose the higher capital ratio requirements. It can do so, she said, if the agency considers the overall condition of the bank, the urgency of threats to the bank's safety and soundness, and existing financial ratios that consider liquidity and capital.
Hsu recently signaled more scrutiny toward banks of NYCB's size. In early September, he said that U.S. banking agencies should
"Given last spring's banking turmoil and the projected growth of large banks, the time may be ripe for the U.S. banking agencies to consider a framework for formally identifying domestic systemically important banks," he said. "Doing so could provide helpful transparency and rigor for those banks that need it as it would clarify the stakes involved in weakly supervising and regulating such institutions."
In July,
"To avoid repeating the mistakes of the past, large banks need strong foundations," he said.
In her letter, Warren repeated some of the questions that she asked in her April missive to Hsu. She also added a number of new questions about the OCC and Fed's oversight, including one about
