The OCC Is a Problem Agency

It's time to say it loud and clear: the OCC is a problem agency.

Here's a list of only some of the issues from the past year: the fair access rule, toleration of rent-a-banks, the valid-when-made rule, the true lender rule (that the FDIC notably didn't copy), the fintech charter, Figure's bank charter application, failure to deal with BoA's fair housing issues; failure to take JPM's unauthorized overdrafts seriously, even a ridiculous interpretation of preemption standards that came out today. (Does this laundry list of problems remind anyone of the FHLBB or OTS?)  

While the current Acting Comptroller has been particularly aggressive in pushing bad ideas, it's not just him. The OCC's been a problem in the past under a range of Comptrollers, even in Democratic administrations. We'll see who President-elect Biden puts in to run the agency, but I suspect that even if the next Comptroller wants to take the OCC in a different direction, it will be difficult. It seems that the agency truly believes that national banks should not be subject to any state regulation (even when Congress says otherwise) and that it is not willing to impose serious consequences for serious consumer protection violations.

The OCC was created in the first place because of a (less-than-successful) plan for financing the Civil War through the sale of national bank notes. In order to sell those bank notes, one needed a national banking charter--which was a revenue source--and national banks were required to buy US gov't debt in a ratio to their note issuance. To make folks want to buy national bank notes, the banks had to be safer and sounder than the state banks. That's why the OCC was created (and hence it's weird name).

We're long past that era, however. National bank notes are a thing of the past. So why do we still have an OCC, when the FDIC and Fed perform the same role?  What's the purpose today of federal chartering of (some) banks, when every other type of business is chartered at the state level? The only answer I can find is path dependence, and that's not a sufficient answer when that chartering is at the core of a problem agency.