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) -- The Office of Thrift Supervision has been getting tough just as it gets ready to disband, leading some to accuse OTS officials of acting to salvage their career prospects in a newly vigilant regulatory community.

While all financial regulators appear to have toughened up in the wake of the financial crisis, the shift by the OTS has attracted particular attention since many in the banking industry regard it as having been especially lax leading up to the crisis.

A Washington-based attorney at a large corporate law firm and a sell-side bank analyst, neither of whom wanted to be quoted for fear of offending regulators, say they think OTS officials are trying to show they are tough so they will not be marginalized as they shift to new jobs, mostly at the Office of the Comptroller of the Currency (OCC).

That sounds like at least one plausible explanation to Roy Whitehead, CEO of Seattle-based thrift

Washington Federal



"I believe that the OTS has developed a tougher approach to regulation since the crisis began. Whether this is a response to lessons learned in the crisis, political pressure, or the perceived need to demonstrate professional toughness to the new sheriff in town, which would be perfectly human, is difficult to know. Probably a combination of the three," Whitehead wrote in an email exchange with



The OTS was the regulator on the two biggest U.S. bank failures of the crisis, Washington Mutual and IndyMac. OTS officials have argued this is a mischaracterization since other struggling banks, such as Wachovia,




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could easily have failed without regulatory intervention, but were protected because they were seen as more systemically important.

In 2009, the Obama Administration prosed the OTS be merged into the OCC as part of a larger financial reform package.

Spokesmen for the OCC and the OTS both rejected the notion that OTS officials are getting tough to protect their careers.

Bill Ruberry, the OTS spokesman, says enforcement orders and other regulatory actions go through multiple layers of approval, so an effort by OTS officials to save their jobs by getting tough would require "some kind of grand conspiracy."

Ruberry also rejects the notion that the OTS has become tougher since the crisis, arguing that enforcement actions are up and exam ratings are down "because the health of the industry has declined."

Ruberry's OCC counterpart, Bryan Hubbard, says the OTS employees will be sorely needed at the OCC given that the regulator will be assuming responsibility for some 675 thrifts after the OTS dissolves as required by the Dodd Frank law passed last year.

"We're very committed not to marginalize employees," Hubbard says. "We need their expertise, their knowledge, their motivation and the sheer manpower that they provide."

Bank regulators codified these sentiments in a "joint implementation plan," submitted to Congress and U.S. Treasury Department officials and published on the

Federal Reserve

website this week.

The plan states that both the OCC and the

Federal Deposit Insurance Corp.

(which will also receive some OTS personnel) "intend to properly document all decisions regarding position and organizational assignments of transferred employees to ensure that every transferred employee is accounted for, aligned properly into the OCC or the FDIC, and retains the same pay, status, and tenure, and to the extent practicable, functions and duties, in effect immediately preceding the effective date of the transfer."

Whether or not professional anxiety is at issue, the OTS continues to attract criticism.

The regulator's decision to close United Western Bank last weekend got the attention of banking industry bible

American Banker

on Tuesday, which argued the regulator's move "seemed atypically quick." Also atypical was United Western Chairman Guy Gibson's decision to issue a press release criticizing the regulator's actions as "precipitous," according to the newspaper. A call to Gibson wasn't returned.

Still, the OTS has plenty of defenders. Jonathan Hullick, bank consultant, former bank executive and senior FDIC regulator, believes the OTS is correct in taking a tougher line.

"In 2008 and 2009 a few large thrifts failed and some commentators suggested that the OTS did not act fast enough. To the OTS's credit, they took swift, meaningful steps to address those situations and sharpen oversight," Hullick says.

There is little doubt that the OTS has gotten tougher, but the same could be said of all regulators, says Ed Kramer, a former bank regulator who is now a consultant at Wolters Kluwer.

"The regulatory environment is getting tougher and tougher," Kramer says. It's a message he repeats regularly to the financial services executives with whom he consults.

"I tell them if you haven't had an exam recently, wait until your next exam. Actually, I don't say wait until your next exam, I say start preparing for your next exam," he says.

And regulators still have plenty of work ahead of them, notes Ron D'Vari CEO of NewOak Capital Markets, an asset manager and consultant that looks at lots of distressed bank assets. D'Vari argues regulators may be second guessed more as they work their way up from the banks in the worst shape to ones that may look comparatively healthy, but are still in deep trouble.

"I don't think the regulators are killing any healthy patients--or even any near-healthy patients," he says.

Washington Federal, however, is considered to be one of the more conservative banks in the Pacific Northwest. It had just one quarter during the crisis when it lost money--the result of writedowns on Fannie Mae and Freddie Mac preferred stock after the government took the mortgage giants into conservatorship and halted dividends on those securities. CEO Whitehead believes his bank acted responsibly leading up to the crisis, and he is not happy with the new regulatory environment.

"Life is more difficult for bank executives, who are spending a much greater share of their time dealing with regulatory and legislative matters. The burden is heavy and growing," he wrote.

Washington Federal entered into a memorandum of understanding with the OTS in July of last year, and the company has hired an enterprise risk management executive and a new compliance manager along with approximately 20 additional employees "to develop the processes expected under the current regulatory approach," according to Whitehead, who added that "the current MOU was not issued based upon resistance from us. We had already agreed to take those steps 60 days prior to issuance of the MOU via a resolution by the board."

Whitehead argues the OTS and OCC have "shifted emphasis," in their examinations from focusing on a metric known as "CAMELS," which stands for Capital, Asset quality, Management, Earnings, Liquidity & Sensitivity to Risk "to focus more on the process used to manage risk." While Whitehead believes CAMELS has its shortcomings, he argues the change "was not well-communicated from the point of view of many medium to small institutions, and seems to have led to more formal and informal enforcement actions."

Ruberry says the OTS has not changed its approach, while the OCC's Hubbard declined comment.


Written by Dan Freed in New York


Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.