Former OneWest CEO will be Comptroller of the Currency nominee
Otting ran lender when Treasury Secretary Mnuchin was chairman
Joseph Otting, a former lieutenant of Treasury Secretary Steven Mnuchin’s at OneWest Bank, has been tapped to lead a U.S. regulator that oversees more than 1,000 lenders — including Wall Street giants.
President Donald Trump plans to nominate Otting to run the Office of the Comptroller of the Currency, the White House said in a statement Monday evening. If confirmed by the Senate, he will play a central role in trying to ease financial rules that the administration blames for stunting economic growth. The appointment would mark a reversal in roles for Otting, as the OCC regulated OneWest when he was the bank’s chief executive officer.
The selection continues Trump’s predilection for filling government jobs with former finance executives, even though he routinely criticized the industry on the campaign trail. Otting’s confirmation would give Mnuchin a key ally in changing the regulatory tone in Washington by dialing back aggressive scrutiny of banks. Meanwhile, the agency is being run by former bank lawyer Keith Noreika, who was put in place as acting comptroller last month under a special employment status that assumes he’ll leave before mid-November.
OneWest was the reincarnation of failed mortgage lender IndyMac Bancorp. Mnuchin and a group of investors that included hedge fund titans George Soros and John Paulson bought the Pasadena, California-based company in 2009 through a government auction.
OneWest named Otting CEO in October 2010, with then-chairman Mnuchin praising his knowledge of the Southern California market. After CIT Group Inc. acquired OneWest in 2014, Otting was co-president for a few months before being replaced.
Otting, who now lives in Nevada, probably will face the same kind of hammering from Senate Banking Committee Democrats over OneWest’s business practices that Mnuchin endured during his conformation process. The bank, created after IndyMac’s collapse during the 2008 financial crisis, seized properties from tens of thousands of homeowners, foreclosures that some Democrats have called unfair and improper. As CEO, Otting arguably had more involvement in the company’s day-to-day operations than Mnuchin did as chairman.
In 2011, OneWest was involved in an enforcement action in which the government ordered mortgage servicers to review whether their foreclosure practices were appropriate. It took four years — most of Otting’s tenure — for the company to satisfy the concerns of the OCC and other banking regulators.
“The president’s choice for watchdog of America’s largest banks is someone who signed a consent order — over shady foreclosure practices — with the very agency he’s been selected to run,” Senator Sherrod Brown, the banking panel’s top Democrat, said in an emailed statement. “If Mr. Otting didn’t deal fairly with the customers at his own bank, it’s difficult to see why he’s the best choice to look out for the interests of customers at more than 1,400 banks and thrifts across the country.”
The White House described Otting as having “a long career in financial services working for a number of highly regarded regional banks.” If he takes over the OCC, Otting will run an independent agency within the Treasury Department that supervises the banking units of major financial firms including JPMorgan Chase & Co., Citigroup Inc.and Bank of America Corp. He also would become a member of the Federal Deposit Insurance Corp.’s board and the Financial Stability Oversight Council.
Otting, who holds a bachelor’s degree from the University of Northern Iowa, would be the first comptroller in decades without an advanced degree, as the agency’s most recent heads have all held law degrees.
His biographical information from the White House lists him as a graduate of the “School of Credit and Financial Management at Dartmouth College,” which is a continuing-education program for financial executives that operated on the campus of the Ivy League institution, but isn’t actually affiliated with it. Records from the program, which is run for two weeks each year by the National Association of Credit Management, confirm that Otting graduated in 1992 when he was a mid-level manager at Union Bank in Beverly Hills, California.
Otting rose through the ranks at U.S. Bancorp and was one of the company’s vice chairmen before getting hired at OneWest.
In more recent headlines, a OneWest subsidiary that focused on reverse mortgages agreed last month to pay $89 million to settle Department of Justice accusations that it failed to follow federal housing laws during a period that included Otting’s tenure.
“Mr. Otting’s nomination is another example of this president’s preference for filling key regulatory posts with Wall Street executives and former bankers with problematic track records,” said Paulina Gonzalez, executive director of the California Reinvestment Coalition, a nonprofit that filed complaints against his bank. “We can’t think of a worse choice for this important position.”
But Brian Gardner, an analyst at Keefe, Bruyette & Woods, said that Otting becoming comptroller would be a positive for the banking industry.
“We expect that Otting will follow through on the Trump administration’s plans for tweaking, but not completely re-writing, the Dodd-Frank rules,” Gardner said Tuesday in a research note.