Comptroller Heads Into Uphill Fight : Banking: Weak backing from the White House may put Robert L. Clarke’s reappointment to five-year term in jeopardy.

WASHINGTON —  Robert L. Clarke is a man in the middle.

As the Senate Banking Committee opens hearings today on his appointment to a second five-year term as comptroller of the currency, the 49-year-old banking regulator finds himself being fingered by opposing camps as the chief culprit of the current crisis in banking.

He has been pilloried for allowing insolvent banks to stay in business too long and for requiring banks to shore up their loan portfolios by tightening credit standards--a step some critics have charged helped cause the credit crunch of the past year.

Indeed, some Senate Democrats seem poised to try to turn the hearings into a forum on the Bush Administration’s handling of the banking and savings and loan crises and to make Clarke the scapegoat for all that’s wrong with the banking system.

“The Democrats see him as a surrogate,” one lobbyist said. “Clarke is just a pawn in all of this.”

Banking Committee Chairman Donald W. Riegle Jr. (D-Mich.), who has delayed hearings on the appointment since January to pressure the Administration into providing more information on its handling of the banking problem, has called on the White House to withdraw Clarke’s nomination.

Riegle concedes openly that the comptroller will face a tough grilling during the hearings. “We have had a hard time getting information on a timely basis from the Administration,” he said. “We’re going to take all the time we need.”

It’s not immediately clear whether Democrats on the banking panel will be able to block Clarke’s reappointment, particularly if the White House lobbies heavily for approval of his nomination.

“The vote seems to change from day to day,” said Clarke’s spokeswoman, Lee Cross.

But subjecting Clarke to vocal criticism is certain to embarrass the White House and could signal other regulators that lawmakers want the comptroller’s office--and other regulatory agencies such as the Federal Reserve--to be more vigilant.

Part of the problem is a widespread belief--both in Congress and outside the government--that the comptroller’s office has been the least effective of the three major bank regulatory agencies--the comptroller, the Fed and the Federal Deposit Insurance Corp.

Some critics say Clarke’s biggest problem is that he has alternated between being too lenient and too rigid, that he often cracked down on bank excesses long after other regulators had tightened.

Opponents say Clarke, essentially, missed signs that began appearing several years ago that the Bank of New England was getting into trouble. At the same time, Riegle plans to argue that Clarke didn’t police the industry closely enough as more and more banks began to fail.

Riegle and other opponents will argue that Clarke has been an inept regulator at a time of great stress on the banking system. They are likely to ask pointed questions about the comptroller’s decision this year to freeze the pay of many bank examiners, the front-line troops who safeguard the soundness of banks.

A five-year freeze, to be followed by a reduction in salary, was imposed on 390 employees, including 247 examiners, at the beginning of this year, sources said. The pay freeze hit the older workers hardest: 180 of the affected examiners are older than 40. The agency’s work force of 3,100 includes about 2,400 examiners.

Besides questions about the collapse of large banks and about his management, Clarke also is expected to face inquiries about his personal finances.

A wealthy man, he refused to put his portfolio into a blind trust until newspapers disclosed this spring that he was still managing his own stocks despite the appearance of a conflict of interest.

Just how hard the Administration will fight for Clarke’s confirmation remains to be seen. Industry lobbyists speculate that the White House may let Clarke take the blame for the banking crisis--by not pressing very heavily for his reappointment.

White House Chief of Staff John H. Sununu, a former governor of New Hampshire with close ties to New England business leaders, reportedly opposed a second term for the comptroller. Clarke was saved only by the intervention of his boss, Treasury Secretary Nicholas F. Brady.

Meanwhile, Clarke is mounting his own counteroffensive. Last weekend, he revealed a plan to add to the office 300 bank examiners--a 15% increase--to tighten up the agency’s supervision of banks.

He said the extra staff would enable his office to examine each of the 3,900 national banks that it supervises at least once every 18 months.

He also made public his own set of statistics, challenging Riegle’s and House Banking Committee Chairman Henry B. Gonzalez’s (D-Tex.) contentions that banks supervised by Clarke’s office accounted for proportionately more failures than those regulated by the Fed or the FDIC.

Times staff writer Robert A. Rosenblatt contributed to this story.

Robert L. Clarke: The Comptroller and the Questions

Robert L. Clarke is likely to face opposition at today’s Senate Banking Committee hearings on his renomination as comptroller of the currency. Here are some of the issues that committee members are likely to ask about:

Credit crunch. Some critics say the abrupt regulatory tightening by the comptroller’s office in 1990--in which regulators suddenly told banks to cut back on questionable loans--played a major role in bringing about the credit crunch that year and in pushing the nation into a recession. Clarke denies that his office acted so abruptly.

Problem banks. Opponents of the reappointment charge that the comptroller’s office was late in spotting--and taking steps to avert--the financial troubles that ultimately plagued the Bank of New England and other ailing institutions. Clarke concedes that he has made mistakes but insists that the agency took steps to stave off the industry’s problems.

Overall performance. Government figures show that enforcement actions by the comptroller’s office declined sharply--from 624 in 1986, Clarke’s first year in office, to 316 in 1988--just before the new wave of bank failures got fully under way. Lawmakers are apt to ask how Clarke can justify this when the industry’s health has been in decline.

Comparison with other regulatory agencies. Congressional studies suggest that the portion of the banking industry that Clarke’s office regulates saw proportionately more bank failures than those overseen by companion agencies, the Federal Reserve and the Federal Deposit Insurance Corp.

Personal finances. Even though Clarke was comptroller of the currency and in a sensitive position as a government regulator, he continued to make decisions on his own stock portfolio and did not establish a blind trust for his investments until after newspaper disclosures essentially forced him to do so.