It’s about time people recognize that John Walsh is a miserably bad regulator, and that the OCC is a useless agency. That they happen to be the main regulator for the nation’s banks is a fairly sad but expected corollary to this. But as bad as bank lobbyist John Dugan was running OCC in the Bush years, Walsh has provided a remarkable amount of consistency. Which isn’t surprising, because he was Dugan’s top deputy. Dugan stepped down last August, and since then, Walsh has carried on the OCC tradition of being submissive to the banks. He may have finally gone too far when he had the audacity to suggest that banks are overcapitalized in a speech in London earlier this week. Lawmakers have finally been roused to speak out.

Three Senate Democrats – Jack Reed of Rhode Island, Carl Levin of Michigan and Jeff Merkley of Oregon – have publicly called for the White House to replace Mr. Walsh, a Republican, following his speech in London Tuesday.

The lawmakers were particularly rankled by Mr. Walsh’s statements that bank capital requirements – the cushion banks hold against future losses — are already “exceedingly high” and that regulators should be cautious about much more they require the largest banks to hold, something foreign and U.S. regulators are now negotiating.

“Mr. Walsh’s latest comments provide further evidence that he is not interested in leading an agency charged with ensuring the safety and soundness of our financial institutions,” Mr. Reed said in a statement. Mr. Reed, a senior member of the Senate Banking panel which oversees the OCC, went on to call for the Obama administration “to fundamentally re-think the OCC’s leadership and ensure that American taxpayers are never again on the hook for Wall Street’s misdeeds.”

This is not just about nominating a permanent director, something the Obama Administration has neglected to do for almost a year. As Rep. Brad Miller (D-NC) said to me at Netroots Nation, the Administration can find anyone they want to fill that position in the interim. They don’t have to settle for the deputy of a bank lobbyist if they don’t want to.

The nomination of Thomas Curry, a member of the FDIC board and a former bank commissioner in Massachusetts, is apparently imminent. But even then, the nomination process could take months. At this time, with the implementation of Dodd-Frank underway and the foreclosure fraud investigations being undertaken by state AGs, it’s about the worst possible moment to have a laissez-faire regulator at OCC. Walsh should go tomorrow.

UPDATE: And now Sherrod Brown (D-OH) becomes at least the fourth Senator to call for John Walsh’s immediate replacement. From a press release:

“I am troubled that Mr. Walsh—the person in charge of overseeing our largest banks—adheres to such deeply flawed beliefs. This is a threat to the stability of our financial system and our entire economy,” Brown said. “Wall Street was nearly brought down our economy three years ago in part by gambling with other peoples’ money. Less debt and more equity will keep our banks on sound footing and ensure that credit is available to Main Street businesses and consumers. Mr. Walsh does not appear to understand this—and that is why he must be replaced as soon as possible.”

David Dayen

David Dayen