Steven Pearlstein wrote a brutal column yesterday on John Dugan, the Comptroller of the Currency.
Dugan is complaining that FDIC Chairwoman Sheila Bair is making the banks pay more than smaller banks to shore up the regulator’s insurance fund. Dugan, who regulates the big boys, says, incredibly, that those big banks aren’t a disproportionate part of the problem.
Pearlstein dispatches Dugan’s reasoning:
But what’s particularly absurd about Dugan’s argument is that it ignores the reason there haven’t been more failures of big banks — namely that these banks were prevented from failing by a Treasury and Federal Reserve wielding sums of money so large that they dwarf anything the FDIC might spend cleaning up after community banks.
Given this history, it requires a particularly warped sense of justice to complain about how unfairly the big banks are now being treated.
Inconveniently for Dugan, his dissent was lodged on the very day that the FDIC took over Florida’s giant BankUnited, at an expected cost of $5.3 billion, equal to the cost of all 30-odd small bank failures so far this year. And last year the FDIC’s $11 billion rescue of IndyMac, the giant California thrift, accounted for well over half of the $17.9 billion losses in 2008.
Pearlstein also calls him out out for being inside the bubble:
It also gives a pretty good indication of how thoroughly the thinking of the nation’s top bank supervisor has been co-opted by the very institutions he is supposed to regulate.
To be fair to Dugan, this phenomenon is hardly limited to him. It applies to many of his peers and even some of the press.
As I read this, I wondered if Pearlstein would go all the way and call for Dugan’s head.
Given this history, there’s no mystery why John Dugan is still running interference for big banks he is supposed to regulate. The mystery is why he is still comptroller of the currency.
That’s a tough column.