Joseph Otting, the 31st Comptroller of the Currency, is the latest of U.S. President Donald Trump’s nominees to find himself caught in a morally dubious situation. Financial disclosure papers have shown that the Wall Street banking regulator tread a fine line in ethical practices with regards to buying financial stocks last year.

No Laws Broken

To prevent a conflict of interests, all nominees are legally bound to declare their assets to the OGE (Office of Government Ethics) which Otting complied with in March, 2017. Upon his nomination the following June, Otting then agreed to unload his bank and insurance company stocks within a 90 day period. Within this 90 day period, however, Otting continued to buy hundreds of additional shares before selling all of his holdings on January 19th of this year.

According to January’s filings, not only did Otting file for a certificate from the OGE to defer a tax bill on his historically owned shares, he also included these newer purchases. Although not directly contravening any laws, this goes against the grain of what the ethical guidelines are designed to prevent.

Integrity and Impartiality

Otting is not the first of President Trump’s appointments to have his personal ties called into question relating to the industry over which they preside. A Washington Examiner article last year highlighted more than half of the president’s nominees at that time, had links to their intended industries.

With respect to this new development, Otting has been uncovered as investing in 366 shares in KeyCorp (KEY.N) after being named for nomination. As one of America’s largest lending companies, KeyCorp fall directly under the regulatory guidance of Otting’s position as head of the OCC (Office of the Comptroller of the Currency). The fact that he still occupies a place on the board of the Federal Deposit Insurance Corporation (FDIC), another regulation body in the banking sector, calls further questions of Otting’s impartiality into public.

Relaxing the reins

Within one month of Otting starting his new role, President Trump signed an executive order to roll-back banking restrictions. The Dodd-Frank legislation was passed in 2010 as a way to keep tighter controls over the loose and irresponsible lending practices which contributed to 2008’s financial crash.

The OCC has taken a clear direction of deregulation under Otting’s stewardship, the latest of which targets small, short-term loans. Speaking at a conference on 25th April, Otting spoke of the need for lifting restrictions on banks to underwrite these smaller-value loans which typically offer between $500 and $5,000, with a repayment period of 45 to 90 days.

Tainted Image

Often referred to as payday loans, the market for these lenders has significantly grown during recent years. Recent studies have shown that around 50% of American families currently can’t afford a $400 emergency payment. When this situation arises, small-ticket loans offer a viable solution for stricken Americans.

Despite the industry suffering a tainted image, there are many honorable loan companies already in existence. These businesses offer a reliable service with their terms clearly stated and promote responsible lending. With banks and post offices looking to enter the market with loans that do not require them to confirm a lenders ability to meet repayments, there’s a fear the industry could fall further into disrepute.

Maintaining Self-Interest

As a long-time advocate of this deregulation, Otting has been recently quoted in favor of allowing banks to “do what they want” regarding leveraged lending on condition it does not harm their overall business. It now appears that the banking regulator has been taking his own advice quite literally.

With almost 1,400 banks and associated agencies falling under his supervision as the Comptroller of the Currency, he is one of the top-ranking government officials in the U.S. Treasury Department. While he is charged with making the banking sector more competitive, he’s also culpable for ensuring it remains responsibly operated both legally and ethically.