Senate Democrats Claim a Top Banking Regulator Is Serving Illegally in His Position

Acting Comptroller of the Currency Keith Noreika should either “become a permanent federal employee or step down from his position," senators argue in a letter to the Treasury.

Keith Noreika, acting Comptroller of the Currency, listens during a Senate Banking Committee hearing in Washington, D.C., U.S., on Thursday, June 22, 2017. Top U.S. banking regulators are sprinting to ease the Volcker Rule, stress tests and other constraints on Wall Street after the Trump administration issued a long list of proposals last week for rolling back post-crisis financial rules. Photographer: Andrew Harrer/Bloomberg via Getty Images
Keith Noreika, acting Comptroller of the Currency, listens during a Senate Banking Committee hearing in Washington, D.C., U.S., on Thursday, June 22, 2017. Photo: Andrew Harrer/Bloomberg/Getty Images

Six Senate Democrats have asked the Treasury Department’s inspector general to investigate whether Keith Noreika, head of the Office of the Comptroller of the Currency, is illegally serving in office.

As The Intercept first reported, September 12 represented Noreika’s 130th day in control of the OCC, one of the most critical banking regulators in the federal government. That’s a key number, because Noreika, a former financial industry lawyer thrust into the position overnight, has been serving as a “special government employee,” a designation that exempts him from certain ethics and disclosure rules for members of the executive branch. This enables Noreika to serve as OCC chief without Senate vetting, and then roll back to a white-shoe law firm, evading certain restrictions on whether he can communicate with former colleagues or lobby the agency.

Noreika planned to serve temporarily until Joseph Otting, former CEO of OneWest Bank and Trump’s nominee for the OCC, was confirmed. But that hasn’t happened yet; Otting’s nomination has sat on the Senate calendar for over a month.

Special government employees are limited to 130 days of service over a 365-day period. The OCC contends that the number only refers to business days, meaning weekends can be taken off and Noreika still has until November to go. But “business days” appears nowhere in the statute.

Time sheets obtained through the Freedom of Information Act by the Revolving Door Project at the Center for Economic and Policy Research and provided to The Intercept suggest that the main regulator for nationally chartered banks has only worked one weekend day, on June 3, in his entire tenure. But special government employee designations are typically reserved for temporary members of advisory committees, not the head of a federal agency. Watchdog groups have argued that, if Noreika isn’t handing off power every weekend, he’s still on call and in charge of the agency, making any day of his service count.

In their letter, the senators agree. “Unlike most SGEs, Mr. Noreika serves as the head of a major agency and has obligations outside of normal business hours,” they write. “Treasury’s interpretation counting only business days toward his service limit is in violation of the law governing SGEs.”

The OCC also argues that as long as Noreika’s tenure wasn’t expected to exceed 130 days, he can continue to serve. CEPR also obtained emails with Treasury officials stating, “We do not expect [Noreika] to serve more than 130 days.” Again, the special government employee statute has been rather lightly enforced over its history, because it’s been used by temporary employees with limited power.

Despite having to recuse himself from matters involving 14 banks that the OCC oversees because of his prior work, Noreika has done plenty since being installed May 5. He’s attacked the Consumer Financial Protection Bureau’s arbitration rule (one he used while representing Wells Fargo), producing a study claiming it would raise the cost of credit.

And, earlier this month, he opened the door for big banks to return to offering a payday loan-style product, just an hour after CFPB issued a rule cracking down on payday loans. It was a remarkable counterattack on a fellow regulator, pulled off after the 130-day clock had expired.

So the Democratic senators, led by Sen. Chris Van Hollen, D-Md., are asking whether Noreika should be able to continue in the job, in what is now his 164th day in office, by their calculations. According to the letter, Noreika has two options at OCC: “Become a permanent federal employee or step down from his position.”

The senators also argue that, because of Noreika’s status, the decision made by the Financial Stability Oversight Council to remove enhanced regulations from insurance company AIG may not have been proper. As OCC head, Noreika sits on the FSOC and cast the deciding vote to remove the “systemically important financial institution” label from AIG.

In the letter to Treasury Department Inspector General Eric Thorson, the senators want him to investigate whether Treasury is misapplying the special government employee rules to Noreika and has designs to use the designation again, such as for the upcoming vacancy of IRS commissioner, in the future. They also asked, “What key decisions has Mr. Noreika participated in since September 12, 2017?”

Other senators on the letter include Sen. Sherrod Brown of Ohio, ranking Democrat on the Senate Banking Committee, and Sen. Elizabeth Warren of Massachusetts.

Top photo: Keith Noreika, acting comptroller of the currency, listens during a Senate Banking Committee hearing in Washington, D.C., on Thursday, June 22, 2017.

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