Banking Law

While most eyes are focused on the FUBAR named "TARP," those of us who inhabit the rabbit warren known as "Bank Lawyer???s Blog" have been head-snapping at less-noticed events that we think might provide "signs-of-the-times" markers for the tea-leaf reader in all of us. Some of those events have to do with certain state and federal bank regulators deciding that now is simply a great time to cash in their chips, pop a Tecate, and head for Cabo.

One of the more notable national players to take an early leave is OTS Director John Reich. Last Monday, Reich told the American Bankers Association (paid subscription required) that he???s as done as an over-grilled sirloin and that he???ll leave the OTS "sooner than late".???

Mr. Reich, who has led the OTS since August 2005, said his biggest regret at the agency was failing to curb no- and low-documentation loans.

"As a former banker raised believing in the fundamental five C's of credit and fully documented loan files, the notion of low- and no-doc loans has been abhorrent to me," he said at the ABA's annual convention in San Francisco

"I regret that I and my colleagues did not act to change these practices, which frankly had been in place for a number of years and seemed to present no material issues until the bottom of the housing market fell out," Mr. Reich said. "Nevertheless, it's what I have the most personal regret about."

It???s not exactly refreshing when a regulator admits that he screwed up after he???s announced his exit. What would be more impressive would be to see one admit "I blew it, big time" while he or she has no intention of doing anything other than staying onboard and trying to make things right. He???d likely be booted by Obama in January or soon thereafter, so maybe it makes no difference in his case.

Reich also hoped that any regulatory reorganization would preserve a small bank industry. Certainly, state bank regulators, whose institutions are primarily smaller, state-chartered community banks, would echo that sentiment.

Colorado Banking Commissioner would be one of them. Well, he would be, except he, too, announced his resignation last week.

Richard Fulkerson is retiring from his position as Colorado???s bank commissioner, the state Department of Regulatory Agencies said Thursday.

Fulkerson???s last day with the department is Nov. 20. Colorado Securities Commissioner Fred Joseph has been named acting bank commissioner until Fulkerson???s successor is appointed.

Unlike Reich, Fulkerson had no reported advice for his successors, the legislature, or the industry. Having been a supervisory agent for the OTS in Topeka, Kansas (where I first ran into him many moons ago), he likely decided that he???s had enough fun with cratering and imploding banks and thrifts to last a lifetime and would like to spend his remaining years pumping his liver up to the size of a basketball with shots of Jim Beam and a Budweiser chaser. Can???t say that I blame him.

Fred Joseph is a reasonable man. I imagine that he'll be more than happy to give up his "acting" title to the next sucker qualified candidate who is appointed to take Fulkerson's place permanently.

It???s interesting that people who have experience in surviving the last big financial institution crisis are looking at the handwriting on the wall and deciding "Enough." "Interesting" in the same sense that it must have been interesting to the passengers of the Titanic to watch crew members step smartly into one of the few lifeboats and shove off. While many of the most visible bank regulators are jockeying for position to "control" the bailout and its aftermath, others are quietly muttering to one another, "Row! Row! Row!"