John C. Dugan

Comptroller of the Currency (since August 2005)

(Dominic Bracco II/TWP)

Why He Matters

The Office of the Comptroller of the Currency (OCC) doesn't get much press. But as comptroller, Dugan was key to drafting major rescue plans in the wake of the 2008-2009 financial crisis, and he will also play a crucial role in revamping the financial regulatory system.

An independent bureau of the Treasury Department, the OCC supervises 1,582 banks across the nation. So as banks began to disintegrate in 2008, Dugan joined discussions about bailing out large institutions whose defaults could send systemic shockwaves throughout the U.S. system. Dugan debated the possibilities with then-New York Federal Reserve President Timothy Geithner, Federal Reserve Board Chairman Ben Bernanke, President George W. Bush Treasury Secretary Henry M. Paulson and Federal Deposit Insurance Corp. (FDIC) Chairwoman Sheila Bair.

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Background

At a Glance

Career History: Partner at Covington & Burling (1993 to 2005); Deputy assistant secretary for financial institutions at the Treasury (1992 to 1993);
Birthday: June 3, 1955
Hometown: Washington, D.C.
Alma Mater: University of Michigan, B.A. (English), 1977; Harvard University, J.D., 1981

Spouse: Elizabeth
Religion: Roman Catholic
DC Office: 250 E Street, SW; Phone: 202-874-5000
Web site

Path to Power

Dugan hails from Washington, D.C., where his father was dean of Georgetown University Law School and his mother was a homemaker. Growing up, Dugan showed little interest in business matters and enjoyed theatrical pursuits. For school, Dugan attended the University of Michigan and earned a degree in English. After graduating in 1977, Dugan moved to Boston, Mass., to attend Harvard Law School.

Capitol Hill Aide and Bush I Treasury Department

In 1981, Dugan finished at Harvard and moved back home to D.C., working as a lawyer for Miller & Chevalier. Dugan stayed at the law firm for four years before going to Capitol Hill as a Republican counsel on the Senate Banking, Housing and Urban Affairs Committee under Chairman Jake Garn (R-Utah). But in 1986, Republicans lost control of the Senate, and many of his colleagues left the Hill, leaving an opening for the committee's minority general counsel. Dugan jumped at the opportunity, serving under minority Banking Chairman Garn.

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The Issues

An offshoot of the Treasury, the OCC regulates nearly 1,600 federally-chartered commercial banks. Dugan also has the dual role of director to the FDIC. In fall 2008, he participated in meetings with Geithner, Bernanke, Paulson and Bair as they debated how to stem the burgeoning credit crisis and prevent troubled banks from collapsing. The New York Times reported in June 2009 that during these discussions, Dugan and Bair began to feud. Dugan called the report "greatly exaggerated," shrugging off their many disagreements as differences in professional opinion.

But the pair's divergent views continued in summer 2009 as the Obama administration looked to create a new financial regulatory structure, including who should have the authority to assess the systemic risk posed by companies. Dugan sided with using the Fed to regulate this risk, while Bair believed the FDIC should have jurisdiction. Bair has also pushed for the creation of a single government agency to oversee financial products, like mortgages, to protect consumers; she also wants Citigroup's management board ousted. Dugan disagrees with the idea of forming a new agency to solely protect consumers and thinks that Citigroup should have a chance to fix things before more government intervention.

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Another cause of the ongoing feud stems from a fundamental difference in opinion over how the country reached the point of bailing out banks. Dugan believes small banks played a vital role, making poor bets on mortgage assets. "Some commenters [sic] suggested that somehow larger banks caused the failures of the smaller banks that have caused losses to the fund," said Dugan during a May 2009 FDIC Board meeting. "This premise is faulty Large banks have certainly had their own problems, but they did not force smaller banks to load up with commercial real estate funded by broker deposits."

Bair, who regulates many small banks at the FDIC, disagreed. "The hundreds of billions, if not trillions, of government assistance that has been provided in the form of capital investments, debt guarantees, and Federal Reserve Board liquidity facilities have overwhelmingly benefitted large institutions and averted many big bank failures," said Bair during the same FDIC meeting. "But they also had the potential of placing smaller institutions at a disadvantage."

Increased Financial Regulation

In March 2009, Dugan testified in front of the Senate Banking, Housing and Urban Affairs Committee for which he once worked. He discussed more stringent financial regulation of banks and other large institutions Dugan called for improving systemic regulation, establishing a way to unwind failing companies at risk of causing widespread failure and enhancing mortgage regulation.

First, Dugan discussed implementing a systemic risk regulator. He supported the popular view that the Federal Reserve Board should take over the regulation of systemic risk to the U.S. financial system. He argued that such a watchdog should have powers that fluctuate, increasing when markets experience unusual disruption. During calm periods, the overseer would analyze information about risk in order to bolster the supervisory role, devising strategies to contain the risk while it's still at a manageable level. When the market hiccups, the risk overseer could set specific conditions for endangered firms.

In situations when a non-bank company's default could cause systemic risk to the rest of the economy, Dugan has called for measures to dismantle the company in an orderly way. The FDIC can take-over a bank and insure their deposits up to a certain level. Non-bank entities don't have the same luxury. But during the 2008-2009 crisis, when non-banks like AIG, Freddie Mac or Fannie Mae failed, the whole economy suffered. Dugan wants the systemic regulator and the Treasury Department to handle such a situation. The regulator would deal with dismantling the collapsing company, while the Treasury would insure the taxpayers.

Dugan also called for national mortgage standards and a way to ensure that these new measures are enforced.

The Green Book

When Dugan first joined the Treasury under George H.W. Bush, he was tasked with directing a study on federal deposit insurance for Undersecretary of Domestic Finance Robert Glauber and Assistant Secretary for Domestic Finance David Mullins. In February 1991, the study "Modernizing the Financial System: Recommendations for Safer, More Competitive Banks" was published. Nicknamed the "Green Book" for the color of its cover, the study called for pairing down regulatory agencies and repealing the 1933 Glass-Steagall Act, which banned banks from merging with insurance companies and brokerage firms.

"In the long run, without increasing their costs materially, banking organizations will be able to earn incremental profits by applying their expertise and resources in related financial activities," according to the study. "This blending of banking, finance, and commerce will create a stronger, more diversified financial system that will provide important benefits to the consumer and important protections for the taxpayer."

Soon after the release of the study, Congress passed the Federal Deposit Insurance Corporation Improvement Act of 1991 that implemented many of the recommendations in the study. It did not repeal the Glass-Steagall Act, but in 1999, the Gramm-Leach-Bliley Act (GLB) was approved, ending the ban on bank mergers with insurance companies and brokerage firms. This allowed for the creation of giant financial companies, like AIG, many of which were deemed "too big to fail" when the 2008-2009 mortgage crisis crippled the U.S. economy. "Whatever you thought of the legislation, that study was a comprehensive and very effective document," said Glauber in 2005. "In the end, all of the legislation that was proposed was passed."

Dugan still supports the study's conclusion. He doesn't believe that GLB caused the mass failures, and felt Glass-Steagall prevented competition and better financial products from entering the market.

The Network

Dugan joined the OCC while Bush Treasury Secretary John W. Snow headed the department. Snow left in 2006, and Henry M. Paulson, Jr. filled the vacant spot. When Obama entered office, he named Dugan's good friend, Timothy Geithner, to replace Paulson.

During the 2008-2009 financial collapse, Dugan participated in negotiations to broker a sale of Wachovia to Wells Fargo. Federal Reserve Chairman Ben Bernanke also helped in the discussions.

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Campaign Contributions

Dugan has donated over $13,000 since 1995. All of his money has gone to support Republican candidates. In 2004, Dugan donated $2,000 to President George W. Bush's re-election efforts. Dugan did not donate during the 2008 election cycle.

Additional Resources