Bank Regulator to Recuse from Volcker to Avoid Conflict
The top lawyer at the U.S. regulator of national banks left a consulting job where she was paid $1.2 million and advised some of the biggest firms now overseen by her agency, her financial disclosures show.
Amy Friend was managing director at Promontory Financial Group LLC before rejoining the Office of Comptroller of the Currency as chief counsel in February. She will recuse herself for a year from discussions of the so-called Volcker rule to ban proprietary trading at banks and from matters affecting Promontory or six former clients, according to an OCC memo.
Friend arrived at the OCC as Promontory was drawing attention for its influence as a middleman between banks and regulators and for its hiring of ex-officials including Julie Williams, Friend’s predecessor as OCC chief counsel, and Mary Schapiro, ex-chairman of the Securities and Exchange Commission. Promontory also was a subject of a Senate hearing last week into a failed $2 billion review of U.S. foreclosure missteps.
Promontory clients listed in Friend’s filing include three of the top six U.S. banks by assets -- Citigroup Inc. (C), Wells Fargo & Co. (WFC) and Morgan Stanley. Other firms, not previously known as Promontory clients, were American Express Co. (AXP), Fidelity Investments, Bank of New York Mellon Corp., Grosvenor Capital Management LP, LPL Financial Holdings Inc. (LPLA), MidCountry Financial Corp., National Australia Bank Ltd. (NABZY), Mitsubishi UFJ Financial Group Inc. and the LexisNexis unit of Reed Elsevier Plc.
Friend said in an interview that when Comptroller of the Currency Thomas Curry asked her to come back to the agency, “I thought about it carefully” before agreeing.
“I really enjoyed Promontory, but in my heart, I really am a public servant,” Friend said.
Friend spent a decade as an OCC lawyer until 2008. For the next two years she was the Senate Banking Committee’s chief counsel under former Senator Chris Dodd, a Connecticut Democrat, helping craft the Dodd-Frank Act of 2010 and a 2009 law to limit credit-card fees and increase notifications.
Dodd said in a statement that Friend “is one of the most fierce public advocates” he’s worked with.
Her return to the OCC “speaks very highly of the agency’s commitment to consumer protection,” said Eric Stein, senior vice president at the Center for Responsible Lending and a former consumer-protection official at the Treasury Department.
The OCC memo on Friend’s recusal states that she won’t participate in Volcker talks. That’s because she advised some Promontory clients on the matter, OCC ethics counsel Jen Dickey said. Five U.S. regulators, including the OCC, proposed the Dodd-Frank Act’s Volcker rule in October 2011 and have been negotiating toward a final version while big banks have warned against it being too complex or restrictive.
Friend also won’t be involved for a year in examinations or enforcement affecting Morgan Stanley (MS) or five other Promontory clients. The ban won’t apply to five clients, including Citigroup and Wells Fargo, because her work for them at Promontory ended more than 12 months before she left the firm, Dickey said. The list will be revisited next year.
Friend also will recuse herself from dealings with Promontory, which was founded by former Comptroller of the Currency Eugene Ludwig in 2001, and from any involvement in the foreclosure review process that included the firm.
“We support her commitment to honoring both the letter and the spirit of the law,” Paul Nash, the OCC’s chief of staff, said in an interview.
Nash said that because of Friend’s Dodd-Frank expertise she “would have a very important perspective” on the Volcker rule. “However, the rule-making is well under way,” he said.
Craig Holman, the government affairs lobbyist for Public Citizen, a Washington-based watchdog group, said Friend’s situation is “a very troubling abuse” of the so-called revolving door between government and business.
“It sounds like a whole lot of work trying to live by this sort of recusal arrangement,” Holman said in an interview. “If the conflicts of interest are so common, she should not be appointed to that position.”
People hired for posts like Friend’s almost always have business experience, said John Hasnas, an associate professor who teaches ethics at Georgetown University’s McDonough School of Business. He said conflict-of-interest rules can’t generally be counted on to eliminate all traces of self-interest.
The nature of the government’s oversight of the marketplace means that “this is an insoluble problem,” Hasnas said.
Friend’s filing showed she was paid $1.2 million at Promontory last year. Before taking the OCC job, which carries a $259,000 salary, Friend sold financial-sector investments, according to her disclosure, which was approved this week by the OCC’s ethics office. The investments were in GE Capital Corp., Discover Financial Services, M&T Bank Corp., New York Community Bancorp Inc., Toronto-Dominion Bank and Wells Fargo. She reported that she and her husband hold stocks, bonds and bank accounts worth between $2.8 million and $11.2 million.
Debra Cope, a spokeswoman for Promontory, declined to comment on the disclosures.
Senator Mark Warner, a Virginia Democrat who observed Friend’s work on the banking committee, said she had the “heart of a regulator” while working on legislation.
“There is this line between trying to get experience and being in public service,” Warner said. “I’m just glad she decided to come back to public service.”
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