Transition at the Fed

You're familiar with the expression "out with the old, in with the new." We use it on occasions of change. We also use the phrase to describe openness or even desire for change. However, when it comes to bank regulations, how much change do we actually want? And what do we want "in with the new" to mean? May, 1998 marks the end of Griff Garwood's career at the Board of Governors of the Federal Reserve System and more than 15 years as Director of the Board's Division of Consumer and Community Affairs. Throughout its history, the Division has defined the role of the bank compliance profession. Griff worked in the bank compliance area early in his career at the Board and - after journeys through some of the Board's other prestigious posts - returned to the Division as its head.

The period of Griff's leadership has taken the compliance world through many compliance changes and crises. For example, Griff saw CRA through two major changes including the formalization of the twelve assessment factors and then replacing those factors with the three tests. He has led the Division through massive changes to Regulation Z beginning with what the staff refers to as "simp" - the so-called simplification of that gargantuan regulation - through the addition of highly politicized features including new rules for credit card disclosures, home equity disclosures, adjustable rate mortgage disclosures, rate caps, high cost mortgages, and reverse mortgages.

Not only has CRA gone through several life cycles during this time, HMDA has done so also. HMDA went from a self-terminating process to significantly expanded line-by-line reporting.

Regulation B was reviewed, a commentary issued, and new issues added, such as appraisal notices, treatment of business applications, and changes to remain compatible with FCRA. Then there is the electronification of banking, communications, and disclosures. Never a dull moment for Griff. Never a dull moment for any of us, for that matter.

In the years he has led the FRB's Division of Consumer and Community Affairs, Griff has worked hard to establish meaningful rules that carry out the intent of Congress but are workable in the business of banking without being unduly burdensome. The Division has also established a standard of excellence in drafting regulations and issuing interpretations. Although tricks and surprises are always buried throughout any regulation, the Division's regulations are well organized written in plain (to the extent that the laws permit) English, and consistent. This is no minor achievement.

So what will happen when Griff steps down? Will Dolores Smith change everything? Is it really going to be "out with the old, in with the new?" Or will it merely be more of the same? My bet is neither - or actually, a bit of both. Dolores has been at the Fed for more than 20 years. She worked on the early versions of Regulation, led in the development of Regulations E and C, and has been consistently involved in the Division's activities and production. In short, she is not new to any of this - she is a veteran. And she will have a staff of veterans to work with.

This means we can expect the same quality products and the same conscientious, careful work. That won't change. But Dolores Smith has had different experiences as well. These may influence how she leads the Division, including how she sets priorities, how she works with staff, and how she presents material to the Board.

One of Dolores' responsibilities has been the running the Consumer Advisory Council, that group of thirty or so individuals invited to share their views with the Board and with each other and always disagreeing to at least some extent. Smith has listened to more CAC discussions than anyone cares to count. She has worked with all facets of the CAC's membership. She thus brings deep background to the job that no-one else has had - deep and detailed involvement in all points of view. It will be interesting to see what influence this experience brings to the job. Stay tuned!

Copyright © 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 7, 5/98