By Pam Martens and Russ Martens: May 10, 2021 ~
You know there’s a problem when the media relations office at the Federal Reserve will not turn over the bio for one of its employees that Treasury Secretary Janet Yellen just tapped to be the acting head of a key Wall Street banking regulator.
After days of media rumors that Yellen was set to appoint Michael Hsu, an Associate Director of the Federal Reserve’s Division of Supervision and Regulation, to be the acting head of the Office of the Comptroller of the Currency (OCC), Yellen made the announcement official on Friday. Hsu is set to assume that position today.
We had attempted to obtain Hsu’s bio from the Federal Reserve for days. We were told they had no official bio. We asked for the resume Hsu provided when he was hired. We received no response. We then asked the Treasury Department’s media relations office for Hsu’s bio. We received no response.
What all the attempted secrecy is likely about is the fact that the organization chart for the Fed’s Division of Supervision and Regulation (that we sleuthed out on our own) shows that Hsu ranks significantly far down the chain of command at the Fed. In fact, ranking higher up in that Division than Hsu are six Senior Associate Directors; two Senior Advisers; three Deputy Directors; and one Director.
According to the Fed’s organization chart, Hsu had 10 people reporting to him at the Fed as of April. At the OCC, he’ll have 3,400 people.
The OCC supervises approximately 1,200 national banks that operate across state lines. Those banks include the Wall Street mega banks that are serially charged with frauds, like JPMorgan Chase and Citigroup’s Citibank. The OCC also supervises federal savings associations and the U.S. branches of foreign banks. The entities supervised by the OCC conduct approximately 70 percent of all banking business in the United States.
Another overarching question is why would Janet Yellen, the Chair of the Federal Reserve from 2014 to 2018, need to reach into the ranks of the Federal Reserve for an acting head of the OCC?
The OCC calls itself an “independent” banking regulator. Its own division for Large Bank Supervision employs 800 people, including numerous Deputy Comptrollers. Why not appoint a career employee from within the ranks of the OCC to be the acting head of the OCC?
What does it do to the morale at the OCC for the U.S. Treasury Secretary to effectively say she has no confidence in the career employees at the OCC and has to go outside that agency to find someone she can trust with the job of acting head?
The OCC hasn’t had a permanent head for almost a year. The last one was Joseph Otting, a Trump nominee with a dubious history at foreclosure king, OneWest Bank Group.
Yellen’s press release about Hsu said she was exercising her rights under 12 U.S. Code § 4, since President Biden has yet to nominate a permanent head at the OCC. That statute reads as follows:
“The Secretary of the Treasury shall appoint no more than four Deputy Comptrollers of the Currency, one of whom shall be designated First Deputy Comptroller of the Currency, and shall fix their salaries. Each Deputy Comptroller shall take the oath of office and shall perform such duties as the Comptroller shall direct. During a vacancy in the office or during the absence or disability of the Comptroller, each Deputy Comptroller shall possess the power and perform the duties attached by law to the office of the Comptroller under such order of succession following the First Deputy Comptroller as the Comptroller shall direct.”
Yellen’s actions that impact the mega banks on Wall Street are being cautiously monitored by public interest groups. Yellen heaped suspicions on herself when she decided to trade her reputation as an impartial Fed wonk for millions in cold, hard cash in speaking fees from Wall Street banks and hedge funds after leaving the Fed in 2018.
After Biden nominated Yellen to be Treasury Secretary, the Office of Government Ethics released her financial disclosure form. It showed a windfall of $8 million in speaking fees after she left her position as Chair of the Federal Reserve. More than $5 million of that came from Wall Street related entities.
That $5 million figure is definitely not the full tally. Yellen’s financial disclosure form reported her cash haul from Wall Street for just the years 2019 and 2020. It is likely that her biggest haul would have been in 2018 when her knowledge of the Fed would have been most timely. Yellen had immediately signed up with the Washington Speakers Bureau after she stepped down from the Fed on February 3, 2018. She acknowledges receiving speaking fees from Wall Street banks in 2018 but doesn’t say how much those fees amounted to.
Yellen was a Fed Governor before becoming Fed Chair and that term didn’t expire until 2024. Yellen could have remained at the Fed and functioned as a public servant. Instead, she opted for cash windfalls from the very same mega banks that blew up the U.S. financial system in 2008 and received a super-secret $29 trillion bailout from the Fed. The details of the Fed’s obscene bailouts were only made public after the Fed waged and lost a multi-year court battle to keep the size of the bailouts a secret.
The largest recipient of the Fed’s bailouts was Citigroup. It received a cumulative total of more than $2.5 trillion in below-market rate loans from the Fed from 2007 through at least the middle of 2010. Yellen’s financial disclosure report showed that she spoke three times at Citigroup, on March 6, March 11, and March 12, 2019. She made $217,200 for each event, for a total of $651,600.
Yellen also raked in a cash haul from Citadel, a giant hedge fund now under scrutiny before the Senate Banking and House Financial Services Committees. Yellen’s financial disclosure report showed she had been paid $992,500 for speaking engagements at Citadel and had refunded it $50,000 to $100,000 for a cancelled event.
The best analysis of Yellen’s speaking fee cash haul came in a Tweet from Jesse Eisinger of ProPublica, who wrote: “Deeply troubling two-fisted money grab from banks by Janet Yellen. This is corruption, but isn’t called that because it’s so quotidian.” Eisinger also noted: “Sure, Yellen might think she can make independent decisions once in office. But how arrogant is it to imagine that money corrupts everyone but you?”
It’s time for President Biden to send a strong message that he plans to make a meaningful, positive difference at Wall Street’s captured regulators and appoint a truly independent Comptroller at the OCC.