Trump’s Newest Wall Street Watchdog Sidesteps Ethics Scrutinyby and
Interim OCC chief Noreika comes with potential conflicts
Unusual maneuver allows administration to oust Obama holdover
The Trump administration used a highly unusual personnel move to skirt Senate confirmation and standard ethics requirements when it installed a financial services lawyer atop a powerful banking regulator.
Keith Noreika’s transition from representing banks to overseeing them came courtesy of a quick two-step. He was made “first deputy” at the Office of the Comptroller of the Currency, a designation that ensured he would ascend to the top job once it opened. Then the administration ousted Thomas Curry, an OCC head picked by Barack Obama who had imposed tough rules and record fines on lenders. Just like that, Noreika became acting comptroller.
While the OCC says Noreika has mitigated potential conflicts, there’s been no public disclosure of an ethics agreement or his former clients. He represented Wall Street firms and an online brokerage that needs the OCC’s sign-off to complete a merger, according to legal filings and a biography that was posted on the website of his previous employer, law firm Simpson Thacher & Bartlett.
Once Noreika assumed his post on midnight May 5, President Donald Trump and Treasury Secretary Steven Mnuchin gained a needed ally in their push to undo financial regulations, an effort that has started slowly because Obama holdovers still lead key agencies. But some Democratic lawmakers and ethics lawyers said the rush to get Noreika into the job is troubling.
“Mr. Noreika is an unvetted attorney who lacks the experience to serve as an independent Wall Street watchdog,” Maryland’s Chris Van Hollen, a Democrat on the Senate Banking Committee, said in an email. “His work in the private sector creates an unprecedented series of conflicts of interest –- further underscoring the need for anyone serving as comptroller to go through the Senate confirmation process.”
Noreika’s position is supposed to be temporary. According to the OCC, he is a “special government employee,” a designation that comes with less stringent ethics rules and frees him from having to sign Trump’s ethics pledge, as long as he serves fewer than 130 days in a 365-day period. The pledge, usually required of all administration appointees, is meant to restrict officials from using their posts for personal gain and includes a 5-year lobbying ban.
The special employee status was designed for part-time government advisers -- not the heads of agencies -- and it allows those types of workers to earn money in the private sector during their service. Noreika, however, has severed ties to his law firm, OCC spokesman Bryan Hubbard said.
“I plan to abide by all ethical rules and guidelines and recuse myself wherever appropriate,” Noreika said in statement, adding that he’s “honored” to serve until the next comptroller is confirmed by the Senate.
Noreika, who worked on Treasury Department issues for Trump’s transition, played a role in his own OCC appointment. Though he sought the permanent comptroller’s job, when it wasn’t offered, he suggested being named first deputy comptroller, said two people briefed on the administration’s deliberations who asked not to be named. That designation allows him to serve as interim head of the agency.
Last week, Mnuchin praised Noreika in a statement announcing the hiring, saying he has deep experience helping banks operate in a “safe and sound manner.” The OCC is an independent bureau within the Treasury.
The Treasury secretary has recommended Joseph Otting, who was chief executive officer of OneWest Bank when Mnuchin was chairman of the firm, to be permanent comptroller, according to people familiar with the matter. If the president nominates Otting, it could be months before he clears the Senate.
While holding the temporary job, Noreika is “subject to the same strong ethics laws that apply to all officials serving in the OCC,” said Tony Sayegh, a Treasury spokesman, who added that he went through a careful ethics screening. “He will be recused from any specific matters involving his clients from over the past year as required by law, and he has divested of all assets that would create any conflict of interest.”
One major matter he will likely have to stay away from is TD Ameritrade Holding Corp.’s $4 billion purchase of Scottrade Financial Services Inc. The OCC has to approve the acquisition because both companies have banking units.
Noreika had been advising TD Bank on regulatory hurdles in connection with the merger, according to Simpson Thacher’s website. Noreika’s other clients have included OCC-regulated lenders JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and U.S. Bancorp, legal filings show.
Traditionally when a comptroller leaves, the position has been filled on an acting basis by a career staff member. For example, the Obama administration turned to John Walsh, a longtime OCC employee, to hold the job for 20 months until Curry’s 2012 confirmation.
The administration’s process for appointing Noreika is “unusual,” said David Lewis, a professor of political science at Vanderbilt University.
“It suggests to me that they don’t trust the career people,” Lewis said. “They want somebody in there that will be responsive to the White House.”
Noreika, who told OCC staff on Tuesday that the agency should “seek opportunities to eliminate” burdens on banks, will occupy a pivotal role supervising Wall Street. While the Federal Reserve’s bank supervision chief tends to draw more attention, the comptroller is one of the few positions that has power to approve rules and enforcement actions alone, because the OCC isn’t run by a board or commission.
The OCC head also has a seat on the five-member Federal Deposit Insurance Corp. and is among 10 officials who vote on policies at the Financial Stability Oversight Council, a panel created by the Dodd-Frank Act to reduce threats to the financial system. Noreika attended his first FSOC meeting this week.
“This guy is literally walking in off the street,” said Jeff Hauser, who runs the Revolving Door Project, a Washington-based group that monitors corporate influence in government. “One week he is being paid by industry, the next he is supposed to regulate them dispassionately?”