OCC Gives Banks Another Blow Job

The acting head of the Office of the Comptroller of the Currency, John Walsh, has unwittingly revealed himself to be running a heretofore stealth operation: The Ministry of Truth According to Banks. In the past, his remarks have had just the right combination of occasional intersection with the truth plus lots of nebulous phrasemaking for him to be able to sound dimly plausible as a regulator, provided you were on reader craazyman’s preferred cocktail of Xanax and Jack Daniels.

Of course, what Walsh really has going for him is the optics: he is the straight-out-of-central-casting image of the head of a largish financial firm somewhere in the heartlands. Given that no one who has been awake in America in the last five years trust banks, and most people have already reasoned from that that a banking regulator who sounds a lot like a banker is probably not such a hot idea either, Walsh’s looking so much the part ought to set off alarm bells. But the conditioning of seeing well preserved middle aged white men with gravitas and decent tailoring as trustworthy has been so deeply programmed into most Americans that it is pretty hard to overcome.

Having said that, Walsh is usually sufficiently adept at shllldom that it takes a bit of doing to decode his bullshit; you can see a recent example where he straightfacedly makes the ludicrous argument that making banks pay pretty modest fines for the horrific damage their servicing and foreclosure misdeeds would hurt them. And of course, since having banks discomfited would be a horrific result, we can’t possibly expect them to make any meaningful restitution for the damage they have done.

Walsh has finally stooped to offering up straight up unadulterated bullshit, as opposed to the perfumed and heavily packaged variety that he typically serves up. I don’t know whether that is because he was having an off day or whether he is so confident that the banks have won that he no longer feels he needs to go through the mental gymnastics of making his arguments, such that they are, sound plausible.

As we noted last week, central banker have suddenly started getting religion about asking financial firms, particularly the large, connected, TBTF variety, to hold more capital. This is a surprising turn of events, given that the direction of virtually everything that has happened since the crisis is to decide to enact not very strong and overly complicated regulations, and then water them down further in the “working out all the gory details” phase.

This reversal suggests that the authorities have realized, now that their minds have been focused by the possible meltdown of the Eurozone, that they’ve let the banks remain far too wobbly. And some might even be cheesed off by banksters paying themselves egregious compensation by virtue of super low interest rates and lots of regulatory largesse, and they’ve realized belatedly that they have to be more directive if they want large capital markets players to firm up their balance sheets.

So what does Walsh have to say about this salutary turn of events? Per the Financial Times, which unduly dignifies this tripe with the headline, “Warning on bank rules reform“:

Calling existing capital levels “extraordinarily high” and proposing a “fundamental rethink” of international liquidity standards, Mr Walsh, acting comptroller of the currency, said: “My view is that we are in danger of trying to squeeze too much risk and complexity out of banking as we institute reforms to address problems and abuses stemming from the last crisis.”

I suspect this claim that capital levels are “extraordinarily high” will go down in history as being on a par with Irving Fisher’s October 1929 remark, “Stock prices have reached what looks like a permanently high plateau.” But Fisher had put his money where his mouth was; he was wiped out in the Great Crash and forced to move in with a relative. He though hard about how he had been so wrong and devised the now widely accepted theory of debt deflation, although his reputation never recovered during his lifetime. I doubt Walsh will have this sort of comeuppance.

Notice the call for a “fundamental rethink”. That sounds well intended but it isn’t. A favorite lobbyist tactic for guaranteeing nothing changes is to stymie reforms by instead calling for voluminous studies of the problem. And he also knows full well that there is no will to take fundamental action, so what is the point of a fundamental rethink?

Back to the FT:

Mr Walsh said that he was in favour of higher capital and liquidity standards and supportive of some reforms to bank structure. But he said the new rules risked going too far. “We don’t know how all of these new approaches will work in practice, how they may interact with one another, and what their cumulative impact will be. In an ideal world, we would take the time to find out and be sure we have it right, but clearly we are not living in that world right now,” he said.

What Walsh is saying, in effect, is all these new rules that pretty much everyone who is not bought and paid for by the banking industry deems to be too wimpy might nevertheless interact synergistically and produce an outcome that is too tough.

Guess what? The director of financial stability, Andrew Haldane, has already thought about the issue. And he has concluded that the sort of rules being proposed inherently will fall short. Haldane reminds us that there are two approaches to companies that produce externalities, like pollution and financial crises: taxation or prohibition. Which is appropriate depends on the level of private costs versus social costs. When social costs are high relative to private costs, prohibition makes more sense. Haldane did a back of the envelope calculation that showed that taxation was grossly inadequate as a remedy.

Capital charges or any measures that operate by changing the industry’s economics fall in the taxation bucket. An example of prohibition would be: “No banks will be permitted to be bigger than $250 billion in assets in five years. We’ll revoke the charters and the access to central bank facilities of anyone who is too large.” Glass Steagall was a prohibitive measure.

Senator Carl Levin had the right response to Walsh:

Mr Levin said: “It is past time for the president to nominate new leadership at the OCC to protect American families and businesses from the excesses of Wall Street.”

Print Friendly, PDF & Email

31 comments

  1. Francois T

    Not only it is a blow job, but Walsh also demonstrate that he also swallows all up.

    Truly disgusting! How come this guy still has a job? Perhaps he is the message President Fuck You sends to the banksters to signals his true intent.

  2. Mickey Marzick in Akron, Ohio

    But the real question to be asked is if Mr. Walsh has learned how to swallow without biting first and then chewing his food…

    Men like him have been on their knees for so long that they forget how to stand up and walk, yet alone provide a seminal thought about how to give a blowjob. Swallowing becomes second nature…

    To expect more at this point in the game is the real blowjob. But the real hope is knowing that after every blowjob there is inevitable collapse. It just comes with the act… no matter how much VIAGRA you swallow.

  3. ἀεὶ Λιβύη φέρει τι καινόν


    well preserved middle aged white men with gravitas and decent tailoring

    ~~Ives~

    Exercise, play it safe-enough to live into middle age, spend some money at the haberdasher, and you too will qualify for a tax-funded-blow-job! Timely advice. Are tax-payers now up in arms? Singing? Singing, “Hell no! We won’t blow!”? Singing, “We won’t fund the Marshal Plan to bail out victims of banksters. Let them eat default.”

    Stay tuned
    !

  4. Independent Accountant

    YS:
    I love this. Regulatory capture at its finest. Where is the SEC while the TBTF banks present phony financials? Nowhere to be seen. Where are the Big 87654 CPA firms? It’s hopeless. Nothing will be done until the system collapses.

  5. Valissa

    re: he is the straight-out-of-central-casting image of the head of a largish financial firm somewhere in the heartlands

    Who is Walsh’s audience for this image? I googled John Walsh using comptroller and other keywords so as to avoud the other John Walsh’s out there. Almost all the articles are in the financial news. I could not find him on Fox News via Google, and at Fox News website he showed up on Fox Business news, not any sort of regular joe news show. I don’t know anyone who knows who he is.

    It appears that John Walsh’s image is merely self-referential for the existing bankster, financial, and political elites. So who cares about this guy… really?

  6. chris

    Yves,

    The whole problem is that the vast majority of Americans no nothing of the true criminality of their nation. They blissfully listen to the left or right and accept the baloney and applesauce handed out.

    They do not know (or care to know) that banks are predominantly insolvent (if they valued their assets at anything resembling the value they would receive if a free market price could be obtained for assets no investor with a clue would purchase).

    However, it does seem that the head of the Office of Comptroller of the Currency would have difficulty in “servicing” his banking masters when there are so many Democrats and Republicans licking their lips for the honor.

    The OCC should be abolished but, since it served as a gateway to become a bank holding company for GMAC, GE Money Bank and others, that isn’t any more likely than the American people pulling their head out of their ass and realizing that bankers should be shown the window exit (or treated to free rides on trebuchets).

  7. guidothekp

    Yves,
    It would be nice if you could summarize your posts, right after the title. This is what newspapers do. I have no idea, sometimes, about the road map of your blog. A summary would let me know if this is something that would interest me, especially if the post is long.

    I had no idea what OCC was and why I would be interested in this. Since you don’t come to the point right away, I had to scan the article for keywords before I could find an anchor. Hence the request.

    Thanks

    1. and i

      You could start a blog yourself. It wasn’t that long ago that I didn’t know what the OCC was, I think it was when spitzer called them out in 2008.

      “Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

      In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

      But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation. ”

      http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html

      Still here’s the thing, crying your little nose isn’t being wiped to your liking is a bit self indulgent.

      1. guidothekp

        “Still here’s the thing, crying your little nose isn’t being wiped to your liking is a bit self indulgent.”

        Yeah, that’s the right way to drive away potential customers. A blog gets it value from the traffic. Drive us all away and nobody will hear the tree fall in the forest. Besides, every -ve review is another $ lost for those ads at the top of the page.

        I, like other people out there, have only so much focus and energy to expend. If getting to a blog requires me to spend energy that I would rather use on critical thinking, I would rather go to a site where the information is more accesible. A reader is a customer. Ask yourself, why the reader is here. Are you offering information that cannot be obtained elsewhere? Likely not. She can be anywhere, but she chose to be here. If your differentiator is being hard to get to the point or filtering out people by getting them to jump through hoops, then that is one business model. Obviously, the filter will cost you audience. If the reader is here for the *quality* of your posts and is that is what you pride this blog for, the barriers will ensure that the material does not get the attention it deserves.

        I read this blog because it pipes information from sources I don’t regularly visit and it makes intelligent comments. If that is not where your value proposition lies, I guess I misread you (pardon the pun).

        1. and i

          “A blog gets it value from the traffic.”

          Who told you that? A blog gets it’s value from the content.

          1. Anonymous Jones

            I’m beginning to get a crush on you “and i.” Where have you been all my life?

            Pointing out that people confuse value with money? How gauche! Please, the emperor is wearing clothes; they are the finest clothes in the world!

            Seriously, you have a bunch of great comments today.

    2. Yves Smith Post author

      I’m sorry, but blogs are not newspapers. Read Felix Salmon on this one.Finance blogs do not say, “Ben Bernanke, chairman of the Federal Reserve”. They say “Ben Bernanke” or “Bernanke”.

      I’m writing for an audience interested in these matters. I’ll break technical concepts down, but explaining who Federal regulators are is not something I’m going to do, particularly since Google makes that trivial for any newbies.

      1. guidothekp

        Yves,
        I did not ask you to break the concepts down. I can always look up stuff on Google. What I cannot get from Google is what you intend to say in your blog. If I did not know who Ben Bernanke is, I can look it up. But there has to be a motivation for doing so. That comes from his actions or a critique of his actions. Put another way, given a verb, an adverb, or even an adjective (ad hominem?), I can always check out the noun in question.

        I am not looking for what OCC stands. I may not know what it is. But that is irrelevant here. I don’t know what the *intent* of your post is. These are two very different things. A good practice, IMO, is to do what newspapers do. A single sentence about the gist of the write up would suffice. Take a look at this WSJ link — http://goo.gl/Fk9Kp. This is how the headline and the summary appear.

        Headline:
        Obama vs. ATMs: Why Technology Doesn’t Destroy Jobs

        Summary:
        Doing more with less is what economic growth is all about.

        Anyway, the call is yours. It is your blog and you have every right to expect people to wade through the verbiage before they know where the story is going. I guess some people do have that kind of time and patience.

        1. Transor Z

          I reckon you’ll need to cancel your paid subscription then, pardner.

          Just kidding: It really is all about you.

        2. Yves Smith Post author

          The headline made it abundantly clear what the post was about. If you can’t figure out what post was about from an obvious headline, I really can’t help you.

          I get over a million page view a month and am regularly in the top 5-10 in Technorati among 20,000 blogs, including one that have lots of staff (Mashable, TechCrunch, ZeroHedge) or just aggregate (GoogelBlogs). So this site does just fine as it is.

          And I am actively opposed to spoon feeding readers as much as you suggest. I make pretty complicated, nuanced arguments. I want people to read them, or at least a fair bit of them. I’m opposed to Twitter and soundbiting generally, it’s part of the general stupidification of America and has helped destroy critical thinking in this country. My real mission here is to do what I can to restore it, and since my area of expertise is finance, I’ll use that as my vehicle.

          Michael Schrage, who is a world expert on innovation, said business need to fire 15% to 20% of their customers, they aren’t worth the brain damage and the time spent trying to satisfy their not reasonable requests is better served getting new customers. Barry Ritholtz, who has been at this longer than I have and has maybe 40% more readers than I do (and always will, he does market coverage and there is a bigger natural audience for that) says “embrace the churn”.

          You’ve identified yourself as a bad fit for this site, you want quick and easy and that is not what I do. No one is holding a gun to your head to read my content.

        3. The Daily Bail

          Your comments are utter nonsense. You have NO IDEA of the difficulty in running a finance/econ blog, especially one such as this with brilliant analysis and daily hilarious prose.

          Truly no idea. Try writing one story per day, let alone 3 or 4. Readers get what they get and should be incredibly thankful. I’ve told Yves on at least one occasion that blogging destroys the soul, from the inside out. Take a guess at the number of emails she receives daily and must read, decipher and deal with. Then imagine the number of stories she reads and videos she watches, all for background and just staying current. Then understand that she must follow ALL the comments that each of her stories receives, and respond when appropriate, and delete spam, etc.

          Again, be thankful for what she provides free of charge, and keep your fucking mouth shut next time.

          If you have a complaint, keep it to yourself. It’s tough enough just publishing without having to deal with mosquitos and gnats. And by the way, I know from my own hellish experience of blogging daily for 32 months, so kindly SHUT IT.

          Steve

          1. The Daily Bail

            And I left out perhaps the MOST DIFFICULT part of the job – the distillation of content and decision on what to cover. I see at least 100 stories and or videos every day that are worthy of the attention of readers. Can you imagine the stress and headaches involved with deciding what to cover in that situation – trying to juggle content (100 tabs open in 4 separate Chrome browsers) all vying for your attention and the attention of your readers.

            You truly have no idea how difficult content decisions are, and so I’ll say it again. If you have a complaint, think first, swallow your words, and most definitely, do not vomit them back up in her comment sections. Bloggers take our work seriously and we don’t take kindly to whiny, useless criticism.

  8. mezcal

    If the OCC wishes to get serious about felating the bankers they’ll need to club all the politicians out of the way first.

    Otherwise they’ll starve to death before they make it to the front of the line.

    1. Up the Ante

      Walsh’s predecessor looked like a snapping turtle, and acted like one in defense of the big banks, so little wonder Walsh’s stomach makes sloshing noises.

      At this point it’s the only reason he has the job.

  9. Frank

    Yves,
    Keep telling it like it is!

    From the Supreme Court rulings to the incestuous Banking sector.

    Your honesty and integrity are bright spot in these dark moments.

  10. Allen C

    A rather provocative title…

    The fox is in the hen house and the lack of attention continues.

  11. doom

    UN Convention Against Corruption Article 19: “Each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, the abuse of functions or position, that is, the performance or failure to perform an act, in violation of laws, by a public official in the discharge of his or her functions, for the purpose of obtaining an undue advantage for himself or herself or for another person or entity.”

    The USG claims they’ve got it covered with 18 U.S.C. § 201, 18 U.S.C. § 1346, 41 U.S.C. § 53 but the government has not assessed the effectiveness of these measures in criminalizing abuse of function.

    Some ambitious legislative bomb-thrower should go ahead and assess the effectiveness of domestic law in criminalizing abuse of function. Whip out that subpoena power. Establish that John Walsh is not, strictly speaking, a cocksucker, but a criminal in 146 countries with aut dedere aut judicare obligations under the CAC.

  12. LAS

    This is very funny …

    Mr Walsh, acting comptroller of the currency, said: “My view is that we are in danger of trying to squeeze too much risk and complexity out of banking as we institute reforms…”

    But he said the new rules risked going too far. “We don’t know how all of these new approaches will work in practice, how they may interact with one another, and what their cumulative impact will be…”

    He’d prefer that consumers, investors and taxpayer risk remain high, so that there’s no earnings risk for banks. What a man!

  13. Paul Tioxon

    Personally, my love of blow jobs is only exceeded by my love of family and devotion to the principles of democracy which made our Republic great. However, I find disturbing, the images of the Larry Craig Brigade of Log Cabin Republicans soliciting even more of the precious bodily fluids of Jamie Dimon and Lloyd Blankfein, among others, for daily oblations. Couldn’t there be a more precise and technical term, maybe spermatorium after the roman vomitorium? Oh well, same difference considering the source.

  14. craazyman

    A very minor correction to anotherwise stellar post, the JX Special doesn’t make an honest man gullible. It numbs the pain of the lies he hears.

  15. David Fiderer

    Here’s the seven-word executive summary: He’s a holdover from the Bush Administration.

  16. TC

    “I don’t know whether that is because he was having an off day or whether he is so confident that the banks have won that he no longer feels he needs to go through the mental gymnastics of making his arguments, such that they are, sound plausible.”

    Such is life when your meal ticket as a regulator relies on a fantasy’s promotion, which more or less summarizes the official response to the ’08 crisis.

    “I doubt Walsh will have this sort of comeuppance.” (i.e. like Irving Fisher)

    Really? Does not Mr. Haldane’s conclusion suggest Mr. Walsh’s comeuppance is a virtual certainty?

    And if I could one up Senator Levin, I’d say it’s past time for the president to git. Waging war without congressional authorization simply is a bozo no no. McCain and Kerry claiming otherwise only demonstrates how pervasive is the all is fantasy approach to government these days.

Comments are closed.