Joseph Otting, a former lieutenant of Treasury Secretary Steven Mnuchin's at OneWest Bank, has been tapped to lead a U.S. regulator that oversees more than 1,000 lenders — including Wall Street giants.
President Donald Trump plans to nominate Otting to run the Office of the Comptroller of the Currency, the White House said in a statement Monday evening. If confirmed by the Senate, he will play a central role in trying to ease financial rules that the administration blames for stunting economic growth. The appointment would mark a reversal in roles for Otting, as the OCC regulated OneWest when he was the bank's chief executive officer.
The selection continues Trump's predilection for filling government jobs with former finance executives, even though he routinely criticized the industry on the campaign trail. Otting's confirmation would give Mnuchin a key ally in changing the regulatory tone in Washington by dialing back aggressive scrutiny of banks. Meanwhile, the agency is being run by former bank lawyer Keith Noreika, who was put in place as acting comptroller last month under a special employment status that assumes he'll leave before mid-November.
OneWest was the reincarnation of failed mortgage lender IndyMac Bancorp. Mnuchin and a group of investors that included hedge fund titans George Soros and John Paulson bought the Pasadena, California-based company in 2009 through a government auction.
Home Foreclosures
OneWest named Otting CEO in October 2010, with then-chairman Mnuchin praising his knowledge of the Southern California market. After CIT Group Inc. acquired OneWest in 2014, Otting was co-president for a few months before being replaced.
Otting, who now lives in Nevada, probably will face the same kind of hammering from Senate Banking Committee Democrats over OneWest's business practices that Mnuchin endured during his conformation process. The bank, created after IndyMac's collapse during the 2008 financial crisis, seized properties from tens of thousands of homeowners, foreclosures that some Democrats have called unfair and improper. As CEO, Otting arguably had more involvement in the company's day-to-day operations than Mnuchin did as chairman.
In 2011, OneWest was involved in an enforcement action in which the government ordered mortgage servicers to review whether their foreclosure practices were appropriate. It took four years — most of Otting's tenure — for the company to satisfy the concerns of the OCC and other banking regulators.
'Shady' Practices
"The president's choice for watchdog of America's largest banks is someone who signed a consent order — over shady foreclosure practices — with the very agency he's been selected to run," Senator Sherrod Brown, the banking panel's top Democrat, said in an emailed statement. "If Mr. Otting didn't deal fairly with the customers at his own bank, it's difficult to see why he's the best choice to look out for the interests of customers at more than 1,400 banks and thrifts across the country."
