Were history a guide, Brian Brooks would be spending the last days of the Trump administration enjoying the Washington view from his spacious government office and contemplating his next career move. Instead, the chief overseer of the largest U.S. banks is infuriating Wall Street.
As acting head of the Office of the Comptroller of the Currency, Brooks finalized a rule Thursday that would force banks to lend to gun manufacturers, oil drillers and other controversial industries that some have refused to do business with. Brooks, who is stepping down now that he’s finished the regulation, has also angered banks by granting federal banking licenses to technology firms, potentially creating a new flock of competitors.
The OCC isn’t alone among federal agencies jamming through rules before President-elect Joe Biden is sworn in on Jan. 20. But Brooks’s 11th-hour agenda has been a shock to banks because they’d grown accustomed to getting their way with President Donald Trump’s financial regulators, who have spent much of the past four years loosening post-crisis rules and taking a low-key approach to oversight.
Banks had little recourse to stop Brooks, a situation that left many firms threatening lawsuits and prompted furious letters to the OCC and critical commentary. The Bank Policy Institute, a trade association of large and mid-sized lenders, blasted his decision to approve the regulation that guarantees businesses “fair access” to banking services and hinted the agency will face a legal challenge.
“The rule lacks both logic and legal basis, it ignores basic facts about how banking works and it will undermine the safety and soundness of the banks,” BPI President Greg Baer said in a Thursday statement. “Its substantive problems are outweighed only by the egregious procedural failings of the rulemaking process, and for these reasons it is unlikely to withstand scrutiny.”
Brooks, a financial services lawyer and former Fannie Mae general counsel who made millions at a cryptocurrency firm, clearly relished the battle. It’s set to be his last fight; Brooks, who likely would have been fired once Biden takes office, is departing Thursday now that he’s wrapped up his agenda. He has feigned shock at the level of industry opposition.
“Are they angry?” Brooks, 51, asked sarcastically in an interview last month. “If there was some myth that the OCC or my political team are too cozy with big banks, you can put that to rest.”
Remarkable Turn
It’s a remarkable turn for the OCC, which watches over JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and other giant financial companies. The regulator has traditionally been seen as the most industry-friendly of the government’s watchdogs, with Brooks’s predecessor Joseph Otting often referring to banks as the OCC’s “clients.”
Brooks points out that he, too, has helped Wall Street since being installed as acting comptroller of the currency in May 2020. Along with other agencies, the OCC has supported dialing back some of the restrictions born after the 2008 meltdown and tweaking capital requirements to ensure firms could keep lending during the coronavirus pandemic.
But he aggressively defends his actions that have drawn bankers’ ire, chief among them the fair access rule. The regulation is partly a response to 2018 announcements from firms, including Citigroup and Bank of America Corp., that they would stop doing business with some firearms makers -- decisions that angered conservatives. Other lenders decided not to finance oil and gas companies that drill in the Arctic, prompting outrage from Alaska’s two Republican senators.
“Business lending decisions should be based on creditworthiness, rather than politics or political pressure,” said Senate Banking Committee Mike Crapo, an Idaho Republican who will soon cede power as Democrats take charge of the chamber. “I applaud Acting Comptroller Brooks.”
Brooks, who first proposed the regulation in November, argues that there’s no reason why financially sound businesses should be denied funding because of politics. He also stressed that it’s not a case of wrapping up an item on Republicans’ wish-list before Democrats take control of Congress and the White House. Underscoring that point, he said banks have been urged to shun Planned Parenthood, an organization frequently in the crosshairs of GOP lawmakers.
“We’re asking, ‘Is there any reason why it should be OK for a bank to boycott an entire legal industry segment?’” Brooks said. “And if there is, I haven’t heard it.”