Bank of America Corp (BAC)

[garza]

Bloomberg: Bank Rescue Takes Shape

By Alison Vekshin

Jan. 31 (Bloomberg) -- President Barack Obama will retain Republican John Dugan, the supervisor of national banks, for another year, keeping intact the team of policymakers crafting a the administration’s response to the financial crisis, two people familiar with the decision said.

Dugan, who heads the U.S. Treasury’s Office of the Comptroller of the Currency, has helped shape policy as Obama grapples with deteriorating credit markets. His agency oversees more than 1,500 banks, including those of Citigroup Inc. and Bank of America Corp. His term expires in August 2010.

OCC spokesman Kevin Mukri declined to comment.

Dugan, 53, participated in discussions this week with Federal Reserve Chairman Ben S. Bernanke, Treasury Secretary Timothy Geithner and Federal Deposit Insurance Corp. Chairman Sheila Bair on reshaping the administration’s approach to the $700 billion bank bailout. Obama has decided to keep Bair, House Financial Services Committee Chairman Barney Frank has said.

While details could change, the bank-rescue initiative is likely to feature an aggressive effort to remove toxic assets clogging lenders’ balance sheets. The FDIC will probably run a so-called bad bank to buy some of the underwater securities; others will be insured by the government against losses but remain on lenders’ books. In addition, another round of capital injections for the biggest banks is planned.

The Obama economic team also has said it will spend $50 billion to $100 billion to help homeowners facing foreclosure, and will provide aid to cities unable to borrow money.

Geithner, speaking to reporters this week, said the administration is “putting together a comprehensive plan for helping repair the financial system.” The plan could be released as early as next week, people familiar with the plans said.

Financial, Regulatory Reform

Dugan has taken part in decisions on how the government should use authority under the rescue package that lets the Treasury inject capital directly into financial institutions and buy their bad assets.

Yesterday’s discussions centered on financial and regulatory reform, the Treasury said in an e-mailed statement.

Collapsing the Office of Thrift Supervision, the regulator of savings and loans associations, into the OCC is among possible changes Congress and the Obama administration will consider as they overhaul the U.S. financial regulatory system.

Dugan has said while he’s not advocating the idea, his agency is preparing for that possibility.

“We do have a lot of bank regulators and there is a lot of overlap,” Dugan said in a Jan. 14 telephone interview. “If you’re going to go down that path, I think that we will work with Congress to do whatever makes sense.”

Law Firm

Dugan, appointed by President George W. Bush, was sworn into office in August 2005. He was a partner at the law firm Covington & Burling in Washington, where he led the financial institutions group and specialized in banking regulation. Presidents have the option of replacing agency heads, even before the expiration of their terms.

He served at the Treasury Department from 1989 to 1993, including an appointment as assistant secretary for domestic finance in 1992. He also has served as counsel for the U.S. Senate Banking Committee.

The Washington-based OCC was created in 1863 and issues rules and guidelines concerning bank operations.

John Reich, director of the Office of Thrift Supervision, said in November he planned to step down in a few months.

http://www.bloomberg.com/apps/news?pid=20601087&sid=as4Obv7ZYA3A&refer=home