December 8, 2023

DealBook: JPMorgan Board Feels Heat From Upset Shareholders

Jamie Dimon, chairman and chief executive of JPMorgan Chase.Keith Bedford/ReutersJamie Dimon, chairman and chief executive of JPMorgan Chase.

As JPMorgan Chase’s annual meeting nears, much of the tension surrounds a critical vote to split the chairman and chief executive roles — a decision that could strip Jamie Dimon, the bank’s influential leader, of the dual titles he has held since 2006. Behind the scenes, though, another battle is brewing.

Some JPMorgan shareholders are taking public aim at individual directors who hold crucial positions on the bank’s audit and risk committees as the bank grapples with an onslaught of regulatory challenges.

On Friday, the CtW Investment Group, which represents union pension funds and owns six million shares in JPMorgan, said it planned to vote against the three directors on the risk policy committee and the head of the audit committee. While it is not known how other shareholders are voting on directors, big stakeholders like BlackRock, T. Rowe Price and TIAA-CREF have increasingly taken aim at boards, voting against directors they think are performing poorly.

JPMorgan, once the darling of Washington after emerging from the financial crisis in far better shape than its rivals, suffered a multibillion-dollar trading loss last year. Since then it has increasingly found itself under regulatory scrutiny for potential risk and compliance lapses.

The Office of the Comptroller of the Currency, one of the bank’s chief regulators, is deciding whether to bring new enforcement actions, according to people who spoke on the condition of anonymity. One action the agency is considering, these people said, focuses on whether JPMorgan used faulty documents in lawsuits to collect overdue credit card debt.

In one of the latest regulatory crackdowns, investigators from the Federal Energy Regulatory Commission sent a scathing message to the bank in March that warned of a potential action over accusations of manipulation in the energy markets. The confidential government document, reviewed by The New York Times, also took aim at a top executive, Blythe Masters, contending she gave “false and misleading statements” under oath.

“We intend to vigorously defend the firm and the employees in this matter,” said Kristin Lemkau, a spokeswoman for the bank, which is the nation’s largest. “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”

While Mr. Dimon apologized in a recent letter to shareholders for disappointing “our regulators,” vowing to bolster controls and “do all the work necessary to complete needed improvements,” some shareholders are not satisfied and are now considering how to cast their votes. Some shareholders are reluctant to vote to split the role of chairman and chief executive, saying the right way to send a message is to vote against certain directors, a move they think will result in positive change at the board level.

JPMorgan’s annual meeting is on May 21 in Tampa, Fla., and the results of shareholders’ votes on all the proposals will be announced then. Directors and senior executives at the firm have been contacting major shareholders in recent weeks, hoping to ease any concerns they might have. They hope to persuade investors not only to back the board but also to vote against a proposal calling for the separation of the chairman and chief executive role. Last year, 40 percent of shareholders supported the proposal.

Shareholders like CtW are singling out members of the risk committee because they think the board failed to police the bank in important areas, contributing to the trading loss in 2012.

“What we have learned over the past year is that the performance of the risk committee is even worse than we thought,” said Richard Clayton, CtW’s research director. “Their behavior is a combination of being out at sea and asleep at the wheel. Both are bad and together they are disastrous.”

James S. Crown, who has been a director of JPMorgan or one of its predecessor companies since 1991, is chairman of the risk policy committee. The other members are David M. Cote, the head of Honeywell International; Timothy P. Flynn, a former KPMG executive; and Ellen V. Futter, president of the American Museum of Natural History. Mr. Flynn was appointed to the risk policy committee in August 2012.

CtW also plans to vote against Laban P. Jackson, chairman of the audit committee, which shares responsibility for oversight.

CtW voted against all four directors last year but went public only about its displeasure with Ms. Futter, contending she lacked banking experience. Last year, 86 percent of shareholders voted for Ms. Futter, the lowest amount of support for any director. A person close to JPMorgan who spoke on the condition of anonymity because he was not authorized to discuss board matters publicly, said that while Ms. Futter was not a career banker, she was well steeped in issues like reputational risk, bringing value to the committee.

Failing to receive a majority of shareholder votes does not necessitate a resignation, but such a vote might prompt a director to leave.

In 2011, before the big trading loss, CtW met with senior bank executives, warning that risk controls needed to be improved. It felt its concerns fell on deaf ears.

At a recent meeting with bank management, including the chief financial officer, Marianne Lake, and the general counsel, Stephen M. Cutler, the company owned up to its recent risk lapses, CtW said, but it has failed to devise any significant changes to improve the risk committee’s operations.

“We realize there was a management failure,” said Dieter Waizenegger, CtW’s executive director. “But it is as if the board didn’t do anything wrong and that is puzzling.”

Ms. Lemkau, the bank spokeswoman, said, “We disagree with CtW on the points they have raised but continue to engage with them.”

CtW’s six million shares are worth about $285 million. In contrast, the company’s biggest shareholders own more than 100 million JPMorgan shares each.

Since the trading loss last year, JPMorgan and its board have worked to fortify controls. JPMorgan’s board reduced Mr. Dimon’s pay this year by more than 50 percent, to $11.5 million, and issued a public report on the trading misstep. With the approval of the board, JPMorgan also clawed back more than $100 million in pay from the employees at the center of the soured wagers.

Last year, the board met 15 times, according to documents filed with the Securities and Exchange Commission. In the bank’s proxy filing, the 11-member board said that Mr. Dimon should continue to hold the duel top posts.

“The board has determined that the most effective leadership model for the firm currently is that Mr. Dimon serves as both,” the filing said.

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DealBook: JPMorgan Caught in Swirl of Regulatory Woes

Jamie Dimon, chief of JPMorgan Chase, at a Senate panel last year.Karen Bleier/Agence France-Presse — Getty ImagesJamie Dimon, chief of JPMorgan Chase, spoke to a Senate panel last year.

Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” and that one of its most senior executives gave “false and misleading statements” under oath.

The findings appear in a confidential government document, reviewed by The New York Times, that was sent to the bank in March, warning of a potential crackdown by the regulator of the nation’s energy markets.

The possible action comes amid showdowns with other agencies. One of the bank’s chief regulators, the Office of the Comptroller of the Currency, is weighing new enforcement actions against JPMorgan over the way the bank collected credit card debt and its possible failure to alert authorities to suspicions about Bernard L. Madoff, according to people who were not authorized to discuss the cases publicly.

In a meeting last month at the bank’s Park Avenue headquarters, the comptroller’s office delivered an unusually stark message to Jamie Dimon, the chief executive and chairman: the nation’s biggest bank was quickly losing credibility in Washington. The bank’s top lawyers, including Stephen M. Cutler, the general counsel, have also cautioned executives about the bank’s regulatory problems, employees say.

Mr. Dimon acknowledged in a recent letter to shareholders that “unfortunately, we expect we will have more” enforcement actions in “the coming months.” He apologized for letting “our regulators down” and vowed to “do all the work necessary to complete the needed improvements.”

Still, the broad regulatory scrutiny — at least eight federal agencies are investigating the bank — presents a threat to JPMorgan at a time when it is raking in record profits.

For executives, the bank’s transition from model citizen to problem child in the eyes of the government has been jarring. It has helped drive top managers out of the bank, and it could make a coming shareholder vote on whether to split the roles of chairman and chief executive an anxious test for Mr. Dimon, long the country’s most influential banker.

Given the bank’s strong earnings, investors are unlikely to pull out. Yet a growing number of shareholders say they are concerned about the regulatory problems.

In the energy market investigation, the enforcement staff of the Federal Energy Regulatory Commission, or FERC, intends to recommend that the agency pursue an action against JPMorgan over its trading in California and Michigan electric markets.

The 70-page document also took aim at a top bank executive, Blythe Masters. A seminal Wall Street figure, Ms. Masters is known for helping expand the boundaries of finance, including the development of credit default swaps, a derivative that played a role in the financial crisis.

The regulatory document cites her supposed “knowledge and approval of schemes” carried out by a group of energy traders in Houston. The agency’s investigators claimed that Ms. Masters had “falsely” denied under oath her awareness of the problems and said that JPMorgan had made “scores of false and misleading statements and material omissions” to authorities, the document shows.

It is unclear whether the agency will file an action against JPMorgan based on the investigators’ findings. A majority of the five-member commission must first endorse the case. If the regulator does proceed, it could fine the bank and Ms. Masters.

“We intend to vigorously defend the firm and the employees in this matter,” said Kristin Lemkau, a spokeswoman for the bank. “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”

JPMorgan has until at least mid-May to respond to the accusations in the document.

As the bank fights the energy investigation, it says it is trying to rectify other lingering compliance woes.

Recent departures from the bank, however, could complicate that effort. Frank J. Bisignano, the co-chief operating officer known for cleaning up JPMorgan’s troubled mortgage division after the 2008 financial crisis, announced his departure this week. Barry Koch, a senior lawyer with strong ties to law enforcement, is also expected to soon leave the bank, people close to Mr. Koch say.

Mr. Dimon’s meeting with the comptroller’s office last month further highlighted the bank’s challenges with regulators.

In the credit card investigation, people briefed on the case said the comptroller’s office had discovered that JPMorgan was relying on faulty documents when pursuing lawsuits against delinquent customers. The accusations, which are expected to prompt an enforcement action later this year, echo complaints that JPMorgan and rivals plowed through home foreclosures with little regard for accuracy.

In a separate investigation into JPMorgan’s relationship with Mr. Madoff, the comptroller’s office raised concerns that the company may have violated a federal law that requires banks to report suspicious transactions. Eventually, the people said, the agency could reprimand the bank for the potential oversight failures.

“We believe that the personnel who dealt with the Madoff issue acted in good faith,” Ms. Lemkau, the bank spokeswoman, said.

Some bank analysts also note that JPMorgan’s strong earnings could ameliorate concerns among its investors.

“As long as you’re making money, investors don’t care,” said Paul Miller, a managing director at FBR.

Regulators, however, increasingly do care. When the comptroller’s office sought documents in the Madoff case from JPMorgan, the bank declined, citing attorney-client privilege, according to bank employees. The dispute was then elevated to the Treasury Department’s inspector general, which oversees the comptroller’s office.

“The matter is pending,” said Richard Delmar, a counsel to the inspector general.

The Madoff case, authorities say, exposed a recurring problem at JPMorgan — what they say is its sometimes combative stance with regulators. In a recent report examining a $6 billion trading loss at the bank, Senate investigators faulted JPMorgan for briefly withholding documents from regulators. The trading loss has spawned several law enforcement investigations into the traders who created the faulty wager.

Mr. Dimon, who is not suspected of any wrongdoing, met this week with prosecutors and the F.B.I. to discuss the case, two people briefed on the investigation said.

A day before the Senate subcommittee released its report on the trading loss, JPMorgan received another ominous dispatch from Washington. On March 13, enforcement officials at FERC notified the bank that it planned to recommend an action over the power plant investigation.

JPMorgan is the latest big bank to face scrutiny from the energy regulator, which recently pursued actions against Barclays and Deutsche Bank. The cases reflect how the regulator has kept a more vigilant watch over the energy markets ever since the Enron fraud.

But Wall Street is fighting back against the new approach, casting the agency’s enforcement unit as overzealous and overreaching.

The JPMorgan case arose, according to the document, after the bank’s 2008 takeover of Bear Stearns gave the bank the rights to sell electricity from power plants in California and Michigan. It was a losing business that relied on “inefficient” and outdated technology, or as JPMorgan called it, “an unprofitable asset.”

Yet under “pressure to generate large profits,” the agency’s investigators said, traders in Houston devised a workaround. Adopting eight different “schemes” between September 2010 and June 2011, the traders offered the energy at prices “calculated to falsely appear attractive” to state energy authorities. The effort prompted authorities in California and Michigan to dole out about $83 million in “excessive” payments to JPMorgan, the investigators said. The behavior had “harmful effects” on the markets, according to the document.

JPMorgan disputes the claims, arguing that its trading was legal.

“The staff is challenging a bidding strategy that was transparent and was in full compliance with the applicable rules,” said Ms. Lemkau, the bank’s spokeswoman. “We strongly disagree with the staff’s conclusions.”

For now, according to the document, the enforcement officials plan to recommend that the commission hold the traders and Ms. Masters “individually liable.” While Ms. Masters was “less involved in the day-to-day decisions,” investigators nonetheless noted that she received PowerPoint presentations and e-mails outlining the energy trading strategies.

The bank, investigators said, then “planned and executed a systematic cover-up” of documents that exposed the strategy, including profit and loss statements.

In the March document, the government investigators also complained about what they said was obstruction by Ms. Masters. After the state authorities began to object to the strategy, Ms. Masters “personally participated in JPMorgan’s efforts to block” the state authorities “from understanding the reasons behind JPMorgan’s bidding schemes,” the document said.

The investigators also referenced an April 2011 e-mail in which Ms. Masters ordered a “rewrite” of an internal document that raised questions about whether the bank had run afoul of the law. The new wording stated that “JPMorgan does not believe that it violated FERC’s policies.”

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Raskin Urges Penalties on Mortgage Servicers

“The Federal Reserve and other federal regulators must impose penalties for deficiencies that resulted in unsafe and unsound practices or violations of federal law,” Raskin said in remarks to the Association of American Law Schools. “The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties.”

Raskin did not say when the penalties will be announced.

She said that “appropriately sized” penalties would “incentivize mortgage servicers to incorporate strong programs to comply with laws when they build their business models.”

Mortgage servicers, many of which are large banks, collect home loan payments and manage issues like foreclosures.

The servicing issue burst into public view last year when government agencies began investigating bank mortgage practices, including the use of “robo-signers” to sign hundreds of unread foreclosure documents a day.

In April, 14 mortgage servicers, including Bank of America and JPMorgan Chase, entered into a settlement with the Fed, the Office of the Comptroller of the Currency and the now defunct Office of Thrift Supervision on steps that have to be taken to correct and improve their servicing practices, such as providing borrowers with a single point of contact for questions.

As part of the agreement, these mortgage servicers have hired consultants to review foreclosures that took place in 2009 and 2010 to see if any were improper.


Regulators have said these reviews, which are ongoing, will help determine the size of any penalties the servicers will have to pay.

When asked by an audience member whether regulators may as part of the enforcement action seek to have banks reduce mortgage balances for some borrowers in an effort to keep them in their homes, Raskin said it is an option that should “stay on the table.”

“The notion of how we can bring principal reduction into an enforcement action I think is a good question and one that as we think through what remedies and tools that we have is one that should stay on the table,” she said.

Reducing borrowers’ principal has been controversial with critics charging it could create a “moral hazard” – the concept that rescue efforts breed further behavior that exacerbates the existing problem – prompting other borrowers to stop making timely loan payments.

Some consumer groups and congressional Democrats have criticized the use of consultants to do the “look-back” review of mortgage servicers, questioning how independent they will be since their core business is working with banks.

Regulators have defended the decision, saying the consultants, while hired by the banks, report to the agencies.

In her speech Raskin acknowledged the issue is “the subject of much debate” and said regulators would be able to “monitor and judge the completeness of the look-back.”

Democrats have also called for the agencies to publicly release the specifics of what the consultants find and servicers do in response.

On Saturday Raskin endorsed the idea of releasing information publicly but did not get into the specific details of what should be made available.

“The corrective actions that the mortgage servicers are undertaking pursuant to the enforcement actions in an appropriate format also need to be shared with the public,” she said.

(Editing by Andrea Ricci)

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Fair Game: Some Bankers Never Learn

YOU’D think the mortgage bust would qualify as a teachable moment.

But some people refuse to learn from mistakes — a list that apparently includes certain mortgage bankers. Their industry is fighting a new rule that might prevent a repeat of the lending binge that helped drive our economy off a cliff.

In case you just arrived from another planet: America’s mortgage mania was fueled by home loans with poisonous features that made them virtually impossible to repay. It was fun while it lasted, at least for the financial types who profited by making dubious loans and selling them to investors.

But the Dodd-Frank financial overhaul last year barred lenders from making home loans before determining that people could probably repay them.

(It’s depressing that we have to legislate common sense, but, hey, that’s the world we live in.)

Dodd-Frank also required regulators to define the characteristics of loans that would most likely be repaid. The idea was to ensure that banks had skin in the game when they bundled risky mortgages into securities.

The proposal was this: If a mortgage security contains only high-quality loans, the banks can sell the entire offering. If the investments included riskier mortgages, the underwriters must keep 5 percent of the issue on their own books.

Basically, Wall Street would have to eat a bit of its own cooking.

Earlier this year, the Federal Reserve, the Federal Deposit Insurance Corporation, the comptroller of the currency, the Securities and Exchange Commission, the Federal Housing Administration, the Federal Housing Finance Agency and the Department of Housing and Urban Development all agreed on what makes a mortgage most likely to perform well. They examined how different types of loans defaulted, and the attributes of the borrowers in question. Then they invited the public to comment on their proposal; that comment period ends tomorrow.

One attribute of safer loans, the regulators found, was that homeowners had made a down payment of at least 20 percent. Another was that their housing debt did not exceed 28 percent of their monthly income, and that their total debts did not exceed 36 percent.

In other words, regulators said, a relatively low-risk mortgage should look an awful lot like the ones that local banks made before the days of securitization on steroids. Regulators also said that the origination costs on low-risk mortgages should no more than 3 percent of the amount borrowed.

THE mortgage industry squawked. It would prefer that we return to the days of high-fee, anything-goes lending. That is not surprising. But what is surprising is that mortgage bankers are leaning on the same tired argument — that saner lending requirements will undermine the goal of expanding homeownership.

In a comment letter filed with regulators last week, David Stevens, the president of the Mortgage Bankers Association, warned that the requirements on down payments and debt-to-income ratios were “unnecessary and not worth the societal costs of excluding far too many qualified borrowers from the most affordable mortgage loans to achieve homeownership.”

Mr. Stevens, who last March left his job as federal housing commissioner at the Department of Housing and Urban Development, didn’t mention the enormous costs associated with reckless lending. We are still tallying the bills, but to date, taxpayers have funneled $154 billion to Fannie Mae and Freddie Mac. Investors have suffered even greater damage.

While we are discussing societal costs, let’s not forget how minority borrowers and first-time homebuyers were the targets of predatory lenders who lured them into toxic loans loaded with fees.

A study issued last week on the widening wealth gap between minorities and white Americans points to the costs of predatory lending. Conducted by the Pew Research Center, a nonpartisan organization, the study noted that housing woes were the principal cause of precipitous declines in household net worth among both Hispanics and blacks from 2005 through 2009. The organization found that, adjusted for inflation, the median wealth of Hispanic households fell by two-thirds during that period. The wealth of black households declined 53 percent. The net worth of white households fell only 16 percent.

And yet, Mr. Stevens noted in his letter that the mortgage bankers were “working in harmony with a very wide coalition of consumer advocates, civil rights groups and other industry associations, to educate policy makers and legislators concerning this rule.”

One wonders how people who have lost their homes because of abusive lending practices feel about their “advocates” forming an alliance with mortgage lenders on this issue.

Mr. Stevens also argues that restricting mortgage fees to 3 percent, as proposed, would hurt borrowers by reducing their access to credit. Noting that his association opposes excessive fees, he wrote that his group “knows of no data evidencing that points and fees have affected borrowers’ ability to repay their loans.”

He told a different story when he was at HUD overseeing the portfolio of loans insured by the F.H.A.

Testifying before Congress in May 2010, Mr. Stevens cited five years of F.H.A. data showing that loans in which the seller of the property helped defray a borrower’s origination costs by more than 3 percent, known as a sellers’ concession, experienced significantly greater default rates.

In 2008, for example, F.H.A.’s insurance claims on loans where sellers covered 3 percent to 6 percent of buyers’ costs were 50 percent higher than claims on loans where concessions from sellers fell below 3 percent.

The higher concessions created “incentives to inflate appraised value,” Mr. Stevens testified. In other words, high costs do have consequences.

Mr. Stevens, through a spokesman, declined to comment.

As the advocate of the mortgage banking industry, Mr. Stevens is entitled to express the industry’s views. But it would be troubling if such arguments gained traction with regulators. In the years leading up to the crisis, the Mortgage Bankers Association and other financial trade groups persuaded regulators to postpone or water down rules that could have reined in subprime lending relatively early. We all know the consequences — and surely do not need to repeat past mistakes.

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Dodd-Frank Rekindles Old Debate

At issue is whether state banking regulators will be undercut by their federal counterparts when it comes to consumer financial protection laws. Banks, state regulators and consumer advocates have been sparring in legalese-filled comment letters over the last month in response to rules proposed by the Office of the Comptroller of the Currency, which regulates national banks.

Even the Treasury Department has criticized the comptroller’s rules and sided with state officials, saying the rules do not hew closely enough to the Dodd-Frank legislation intended to rein in Wall Street.

A portion of the Dodd-Frank legislation is dedicated to pre-emption, the ability of federal law to trump state laws. Banks, consumer groups and states are now arguing over what the intent of the legislation was.

The comptroller, meanwhile, said that for the most part, the Dodd-Frank bill did not change the office’s power to pre-empt state laws when it comes to regulating national banks. The states contend that the bill gives them new power to avoid pre-emption in some cases.

The issue is a hot one because some consumer advocates say that financial companies were able to get away with lax lending standards and predatory behavior during the surge in home sales before 2008 in part because the lenders could claim that more restrictive state rules did not apply to them.

Banks, on the other hand, say it is more efficient for them to follow national rules as the industry has consolidated and added customers in many states.

The comptroller has been criticized since the financial crisis for often siding with bank-friendly policies, and the office’s critics point to the recently proposed rules on pre-emption as a sign that the regulator has not changed.

“There is extreme consternation in the consumer community that the O.C.C. is continuing to side with banks over consumers to a considerable extent,” said Paul Bland, a senior staff lawyer who works on consumer banking cases at the law firm Public Justice, referring to the Office of the Comptroller of the Currency.

“A clear message of the Dodd-Frank law,” he said, “was that Congress felt that federal regulators, especially the O.C.C., had not been sufficiently aggressive in dealing with advertising by banks. And, because state banks and state regulators were so much more favorable to consumers, Congress wanted to free state regulators from the O.C.C.’s grasp. In these proposals the O.C.C. is very close to trying to pretend that the Dodd-Frank act never passed.”

The comptroller gained expanded oversight responsibilities in the Dodd-Frank law last year, when the Office of Thrift Supervision was shut down, and some of its rules proposed in May applied to merging parts of those two regulators. The regulator is working under an acting director and awaiting the nomination of a permanent leader.

The comments on its proposed rules were due on Monday, and at least 24 were received, including some from Wells Fargo, JPMorgan Chase Company and Citigroup.

A spokesman for the comptroller’s office, Bryan Hubbard, declined to discuss the comments and said there was no timeline for the comptroller to finish evaluating them. “We will be carefully reviewing all comments we’ve received as we move toward a final rule,” he said.

New York State’s new Financial Services Department was one of the strongest critics of the proposed rules, arguing in its comment letter that the rules would “narrow and hamper the application of state consumer protection laws.”

Created this year, the New York department could prove to be a thorn in the side of federal regulators because so many financial companies are based in the state. The department, an amalgam of the state’s old insurance and banking divisions, is being led by one of Gov. Andrew M. Cuomo’s most trusted advisers, Benjamin M. Lawsky. He helped manage many of the cases against banks filed by Mr. Cuomo when he was New York’s attorney general.

In an interview, Mr. Lawsky said that the comptroller was trying to “hinder the intent of Dodd-Frank.”

Mr. Lawsky added: “We think it’s important for consumers and for the financial service industry writ large for the states to continue their vital role. The importance of the states as regulators has been on display the last several years.”

In particular, Mr. Lawsky wrote, the comptroller is trying to use an overly broad definition to determine whether it can overrule a state law and ignoring a mandate to review state consumer laws on a case-by-case basis. He also says that the comptroller is trying to ignore a provision of Dodd-Frank that would allow state attorneys general to enforce federal laws as well as state laws.

Several banks, however, wrote letters supporting the comptroller’s proposals. Citibank wrote, “It would be extremely difficult for these banks to stay current on all state and local laws that could possibly apply to them across the United States, to be certain which ones would cover their activities, and to attempt to comply with such a multiplicity of different — and potentially inconsistent — requirements.”

Wells Fargo wrote that the comptroller’s confirmation of a 1996 Supreme Court ruling on pre-emption helped support a “robust national banking system.” The implications of that case, though, remain in dispute, and the National Association of Attorneys General wrote in a comment letter that the comptroller’s office was basing its proposed rules too heavily on that case and not enough on the intent of Dodd-Frank.

Beyond supporting the comptroller’s proposed rules, JPMorgan made suggestions to try to protect itself from state laws that might hinder the bank’s ability to lend money or demand collateral. JPMorgan also said that it supported the positive comments by the Clearing House, a bank-owned company that handles payments within the financial system. The Clearing House asserted that “any suggestion that federal pre-emption has encouraged predatory lending practices or somehow led to the subprime crisis is baseless and incorrect.”

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Uncertain Leadership Strains Financial Overhaul

The Obama administration has not announced nominees for several positions that Congress created last summer, nor has it nominated new heads for three agencies, including for an imminent vacancy at the Federal Deposit Insurance Corporation.

As a result, temporary leaders tapped by the president increasingly are responsible for the vast overhaul of financial regulations, raising concerns that their decisions will prove more vulnerable to political pressure than permanent leaders insulated by Senate confirmation to a fixed term.

“I look back on my last five years and all the tough decisions I had to make, and if I’d been in an acting capacity, it would have been very inhibiting to me in making some of the tough decisions I had to do,” Sheila C. Bair, who in early June will complete her term as chairwoman of the F.D.I.C., told the Senate Banking Committee on Thursday.

The vacancies have accumulated in part because Senate Republicans have blocked votes on nominees for a wide range of positions. The White House, in turn, has not rushed to add names to the list. In one case, it has temporarily circumvented the Senate by giving the Harvard professor Elizabeth Warren acting responsibility for a new agency focused on consumer financial protection.

The White House also appointed an acting director for the Federal Housing Finance Agency, which oversees the mortgage finance giants Fannie Mae and Freddie Mac. The agency has operated without a permanent head since August 2009. And since August, 2010, an acting director also has run the Office of the Comptroller of the Currency, which oversees most of the nation’s largest banks.

A new position on the Federal Reserve Board, vice chairman for supervision, has remained vacant since it was created last summer. So has a seat on the council of regulators designated for someone with insurance expertise.

Amy Brundage, a White House spokeswoman, said that President Obama would announce nominees for the positions “as soon as possible.”

“The president is looking for strong, well-qualified candidates who can lead these institutions to protect American consumers and taxpayers, while ensuring the stability of an American economy emerging from the worst recession since the Great Depression,” she said.

The White House soon plans to nominate a replacement for Ms. Bair at the F.D.I.C., according to people familiar with the matter who spoke on condition of anonymity because no plans had been publicly announced. The front-runner is Martin J. Gruenberg, currently the agency’s vice chairman, who worked for years as a Democratic staff member on the Senate Banking Committee.

A decision also is close on a nominee for comptroller of the currency, those people said.

The lack of permanent leadership is a significant handicap, according to current and former regulators. It is fairly easy to keep doing the same things, but much harder to navigate unexpected difficulties or to consider new ideas.

And agencies are being asked to do both of those things as perhaps never before.

The sweeping overhaul of financial regulations passed into law last year requires agencies to write hundreds of rules, an unprecedented task, even as they grapple with the unfamiliar financial landscape left by the crisis.

John Walsh, the acting comptroller of the currency, said that Treasury Secretary Timothy F. Geithner had encouraged him to do the job as if it were, indeed, his job.

“But the fact is that I have said to him and have said repeatedly that I do think it’s very important for independent supervisory agencies to have nominated and confirmed heads in place,” Mr. Walsh said Thursday at the same Senate hearing. “It’s important for independence and for the perception of independence.”

Senator Sherrod Brown, an Ohio Democrat, said Thursday that the absence of leadership was complicating the work of identifying “systemically important” financial firms that could pose a threat to the broader economy.

“We need strong nominees who will not be afraid to take bold steps to prevent a new financial crisis,” Mr. Brown said. Senators from both parties urged regulators at a hearing Thursday to offer more detailed criteria for designating such firms, which will be subject to stricter regulation.

Bank holding companies with more than $50 billion in assets automatically fall under the designation, according to the Dodd-Frank law approved last year. But there is no clear standard for selecting other kinds of financial firms like insurance companies, hedge funds and investment managers.

Edward Wyatt contributed reporting from Washington.

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Report Criticizes Banks for Handling of Mortgages

In response to the problems described in the report, mortgage servicers have signed consent agreements promising to put in new oversight procedures and make other changes. The examinations were conducted by the Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision. During their review, the examiners said they saw an unspecified number of cases “in which foreclosures should not have proceeded due to an intervening event or condition,” including families in bankruptcy or those qualified for or in the middle of a trial loan modification.

The servicers include Bank of America, JPMorgan Chase, Citigroup and Wells Fargo none of whom had an immediate comment. Two firms that handle aspects of the foreclosure process, Lender Processing Services and Mortgage Electronics Registration Service, also signed the consent agreement.

“Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward,” the acting comptroller of the currency, John Walsh, said in a statement.

The report said that mortgage servicing departments of the banks did not properly oversee their own or third-party employees at law firms, had inadequate and poorly trained staffs and improperly submitted material to the courts.

As the enforcement actions have leaked over the last two weeks, they have been widely criticized by consumer and housing groups as little more than a slap on the wrist.

“The agreements are a huge disappointment,” said Alys Cohen of the National Consumer Law Center. “They rubber-stamp the status quo. The banks who caused the economic crisis and received government bailouts are getting a free pass while homeowners still struggle  to save their homes.”

The release of the report and enforcement actions came six months after the servicers’ handling of foreclosures became a major issue. The servicers, under pressure from lawyers representing homeowners, admitted to lapses last fall and began foreclosure moratoriums.

State attorneys general, who started a separate investigation, are still working with the Obama administration to change the foreclosure process in a more fundamental way. About two million households are in foreclosure and another two million near it.

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