John Dugan has had one of the most intensive five years of service that any of the previous 28 Comptrollers faced, stretching back to when Abraham Lincoln created the Office of the Comptroller of the Currency in 1863. Dugan, who will leave office on August 14, gave his last speech as Comptroller on July 21 at Washington’s Exchequer Club. It largely centered on his views on the causes and contributing factors to the recent financial crisis from the perspective of a chief banking regulator.
While Dugan didn’t suggest any completely new factors, his forthright remarks offer keen insights into the recent past and what the future holds under the new Dodd-Frank Act. In one passage he talks about why regulators didn’t crack down sooner on lax underwriting, which he called “the worst mortgage underwriting in our nation’s history.” He notes that OCC became vocal about it in 2007, but added, “I wish I and all the bank regulators had taken action on this deeply pernicious practice earlier, because none of us was ever comfortable with it.” He went on to say that part of the reason they didn’t act was that stated-income loans and subprime loans were securitized and thus were not an ongoing credit risk for banks.
Click here to read the full speech.