Eugene Ludwig

Eugene Ludwig
Portrait of Eugene Ludwig
Comptroller of the Currency
In office
1993–1998
Preceded by Robert L. Clarke
Succeeded by John D. Hawke, Jr.
Personal details
Born (1946-04-11) April 11, 1946
Brooklyn, New York, United States
Nationality American
Spouse(s) Dr. Carol Ludwig
Children 3
Alma mater Haverford College
Oxford University
Yale University
Occupation Founder and CEO of
Promontory Financial Group
Former US Comptroller of the Currency

Eugene A. "Gene" Ludwig (born April 11, 1946) is an American business leader and expert on banking regulation, risk management, and fiscal policy. He is the Founder and CEO of Promontory Financial Group, an IBM Company, a global risk management and regulatory compliance consulting firm focusing primarily on the financial services industry. He is also the former vice chairman of Bankers Trust and Deutsche Bank, and from 1993 to 1998 served as President Clinton's Comptroller of the Currency.

Personal life

Ludwig was born in Brooklyn, New York,[1] to Jacob S. and Louise R. Ludwig.[2] He was raised in York, Pennsylvania, attending public schools.[3] His father was a country doctor who took his son with him to get his first office loan.[4] His mother was a former Broadway chorus girl.[5] His younger brother Ken Ludwig is an award-winning playwright.[6]

Ludwig received his undergraduate degree magna cum laude from Haverford College in 1968 and was initiated into Phi Beta Kappa. He received a scholarship to Oxford University, where he studied philosophy, politics and economics at New College and earned a Masters of Arts as a Keasbey Fellow. He holds a law degree from Yale, where he was an editor of the Yale Law Journal and president of Yale Legislative Services.[7] He is a Wykeham Fellow at New College, Oxford.[8] Ludwig lives in Washington, D.C. He is married to Dr. Carol Ludwig, and they have three children.

Ludwig joined the law firm of Covington and Burling in 1973 and became a partner in 1981. He specialized in intellectual property law, banking, and international trade. In 1987, The New York Times described him as a leader in the fight against gray-market goods, which are goods manufactured overseas and imported without the consent of the trademark holder. Ludwig called the practice "consumer deception."[9]

Government service

In 1993, President Bill Clinton selected Ludwig to become the 27th Comptroller of the Currency, responsible for chartering, regulating, and supervising national banks and the federal branches and agencies of foreign banks. As Comptroller, Ludwig led the agency through a period of substantial change, both within the financial marketplace as well as in the supervisory and examination practices of the agency. Ludwig took office at time of economic upheaval, following a recession that yielded a spike in bank failures and amid a credit crunch that had persisted for several years.[10] He took the lead in regulators’ 1993 initiatives to alleviate a lingering credit crunch by encouraging banks to increase lending,[11] and later described the results as “dramatic.” He said: “The credit crunch abated, the economy began to grow again and the banking industry returned to good health.”[12]

Ludwig improved safety and soundness supervision through adoption of "supervision by risk",[13] an approach that has been adopted by many other supervisory agencies.[14]

Ludwig also led President Clinton's initiatives to reform the Community Reinvestment Act and more vigorously enforce the fair lending laws.[15] In December 1993, Ludwig was singled out by then-Secretary of the Treasury Robert Rubin, who praised “his efforts to make CRA reform a reality."[16]

During five years in office, Ludwig oversaw 4,000 fair lending examinations of national banks and made 25 referrals of fair lending violations to the Department of Justice and the Department of Housing and Urban Development. Previously, there had been only one such referral to a federal agency charged with fair lending enforcement.[17]

As Comptroller, Ludwig served as a member of the Basel Committee on Bank Supervision, a director of the Federal Deposit Insurance Corporation, and a director of the Neighborhood Reinvestment Corporation.[18]

Reflecting on his service as Comptroller in April 2010, Ludwig testified before the U.S. House Subcommittee on Financial Institutions and Consumer Credit that "credit made available to low- and moderate-income Americans through CRA programs during ... the 1990s was not only transforming for low- and moderate-income communities, but it was almost without exception profitable and safe."[19]

Business career

Bankers Trust / Deutsche Bank

Ludwig served as vice chairman of Bankers Trust/Deutsche Bank from April 1998[20] to December 31, 1999.[21] During his time there, he participated in the rescue negotiations for Long-Term Capital Management, a bond-trading hedge fund that was recapitalized under the Federal Reserve’s guidance by 16 leading financial institutions to prevent its collapse.[22]

Promontory Financial Group

In 2001, Ludwig founded Promontory Financial Group, becoming its CEO and chairman. The firm gained attention when, following a $750 million trading scandal at Allied Irish Banks, Promontory produced what became known as "The Ludwig Report,"[23] recommending improved compliance and management measures which helped the bank regain its footing.[24] In 2007, after Ludwig advised Countrywide Financial, Portfolio.com wrote that "[Countrywide CEO] Angelo Mozilo is a tough character, and Ludwig is one of the few people with enough clout to persuade him that the game really was up."[25] Business Week reported that Promontory has also advised PNC Financial Services Group, Riggs National Bank, and Citigroup, and helped clean up abuses at AIG.[26] In 2008, Morgan Stanley announced that it had become a client of Ludwig's.[27]

Ludwig also co-founded a separate company, Promontory Interfinancial Network, with former Federal Reserve Vice Chairman Alan Blinder.[28]

Notable statements and testimony

Since founding Promontory Financial Group, Ludwig has been invited to testify before Congress as an expert witness several times:

In October 2008 testimony to the Senate Banking Committee, Ludwig summarized the origins of the Financial Crisis of 2007-08: “The fundamental story of the current turmoil is relatively easy to tell. It began early in this decade with a weakening of underwriting standards for subprime mortgages in the U.S. Subprime, alt-A and other mortgage products [which] were sold to people who could not afford them and in some cases in violation of legal standards.”[29]

In February 2009, Reuters reported that Ludwig was an advisor to U.S. Senate Banking Committee Chairman Christopher Dodd and U.S. House Speaker Nancy Pelosi, as well as Republican Senator Richard Shelby, among others.[30]

In September 2009, Ludwig testified before the Senate Banking Committee and said, ‘‘we must dramatically streamline the current alphabet soup of regulators,’’ citing the burden on financial institutions of duplicative supervision, gaps between regulatory responsibilities, and regulatory arbitrage.[31]

IBM

In September 2016, IBM announced plans to acquire Promontory, citing its status as “the firm financial institutions turned to for guidance coming out of the 2008 financial crisis.” The transaction was completed in November 2016, and the firm— renamed Promontory Financial Group, an IBM Company—became a wholly owned subsidiary of IBM with Ludwig remaining at the helm.[32]

IBM, describing Promontory’s expertise in regulation, risk, and compliance as “unsurpassed,” said Promontory’s team of 600 professionals would train IBM’s Watson cognitive computing system to understand a massive volume of regulations and compliance requirements. By harnessing this information, Watson—which combines artificial intelligence with analytical software to support complex decision-making—could accelerate financial institutions’ ability to understand regulatory changes and obligations and address compliance requirements, IBM said.[33]

Cognitive computing “has the potential to vastly improve existing approaches to risk management, potentially covering everything from stress testing and capital planning to credit portfolio analysis, risk modeling, and regulatory change management,” Ludwig wrote in Investor’s Business Daily in December 2016.[34]

Ludwig stressed that artificial intelligence would complement, rather than replace, human compliance efforts.[35]

Expertise and views

Ludwig has written numerous articles on banking and finance for scholarly journals and publications and has been a guest lecturer at Yale and Harvard law schools and Georgetown University's International Law Institute.[36] A theme in Ludwig's speeches and writings has been his conviction that the economic challenges confronting lower- and middle-income Americans are growing urgent. He has noted that real-wage stagnation, combined with dramatic surges in the costs of basics such as education, housing, health care and food, have created a situation in which middle-income households by 2014 were spending 78% of their budgets on basic needs.[37]

Author

In 2008, he co-authored an essay in The Wall Street Journal with former Federal Reserve Chairman Paul A. Volcker and former U.S. Treasury Secretary Nicholas F. Brady calling for a resurrection of the Resolution Trust Corporation to help deal with the financial crisis. [38]

In June 2010, Ludwig authored a piece in The New York Times observing that although Congress had passed financial regulatory reform, the real work of filling in the details would now fall to the regulators. "If the New Deal is credited with creating the regulatory agencies," Ludwig wrote, "this bill will be remembered for super-charging their authority."[39]

In December 2011, Ludwig authored an article in The New York Times advocating a permanent cut in the payroll tax as a first step toward fundamental tax reform.[40] In 2012, Ludwig and Paul A. Volcker co-authored a Wall Street Journal essay calling for accounting reform to ensure that banks could build adequate loan loss reserves well before losses are realized.[41]

Ludwig is a champion of the idea that universities should create more courses and degrees for financial services supervision and regulation.[42]

Ludwig critiqued the approach of strictly regulating banks while only loosely regulating nonbank financial institutions, or “shadow banks” in an October 2016 article for American Banker.[43]

Writing for Time in October 2016, he decried what he sees as a bias in the federal budget process against crucial spending, particularly for infrastructure, education and research. Ludwig advocated for the creation of a federal capital budget to provide a framework for long-term expenditures, noting that this approach is used in the private sector and by most state governments.[44]

In late 2017, he warned the financial services industry of the risk of economic downturn, saying he feared that "a major tail event that will shock the financial industry is likely in the foreseeable future."[45] In a subsequent article focused on how to identify specific ways institutions are vulnerable to risk, Ludwig raised concern about "groupthink that dismisses a systemic event in the foreseeable future."[46]

Ludwig examined America's economic challenges, especially the decline in opportunities for lower- and middle-income Americans, in an April 2018 article for Banking Exchange. "Economic reality in America is a widening chasm between the wealthy and everyone else, and fueling disquiet in those who struggle economically," he wrote.[47]

Research and speeches

Eugene Ludwig with James Kamihachi and Laura Toh, “The Community Reinvestment Act: Past Successes and Future Opportunities.” Published in “Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act,” February 24, 2009, Federal Reserve Banks of Boston and San Francisco.[48]

Annual Hagedorn Lecture on Corporate Social Responsibility, Adelphi University, September 23, 2008.

William Taylor Memorial Lecture: “We Must Have Supervision and Regulation,” International Conference of Banking Supervisors, Brussels, September 25, 2008.[49]

“Extending Credit to Lower Income Americans Safely and Fairly,” Joint Center for Housing Studies of Harvard University, February 19, 2010.[50]

“Supervision in a Time of Change,” The George Washington University Center for Law, Economics & Finance, October 31, 2013.[51]

Interviews

In September 2010, Ludwig provided expert testimony to the Financial Crisis Inquiry Commission on the causes of the financial crisis of 2007-08.[52]

Since entering government service in 1993, Ludwig has advocated for streamlining the number of regulatory agencies overseeing banks. “Our regulatory system is far too complex,” he said in a January 2017 radio interview. “Too many agencies create a great deal of burden with no particular benefit. It is an artifact of history, not logic, and it needs to be changed.”[53]

Civic activities and honors

Ludwig is president of The Ludwig Family Foundation Inc., a charitable organization that focuses on improving education, alleviating poverty, and supporting medical research and the arts.[54]

He is a long-time member of the board of directors of the National Academy Foundation, a New York-based nonprofit that helps prepare low- and moderate-income students for college and careers.[55] Ludwig has also endowed several funds and programs, including the Ludwig Fund for the Humanities at New College, Oxford[56]; the Eugene and Carol Ludwig Center for Community & Economic Development at Yale Law School [57]; and the Ludwig Fund for Community Development at Haverford College.[58]

Ludwig has received numerous awards for excellence and leadership, including the BritishAmerican Business Entrepreneurship Award (2010),[59] National Academy Foundation Leadership Award (2011),[60], Simeon E. Baldwin Award, presented by the Yale Law School Center for the Study of Corporate Law (2011)[61], the Foreign Policy Association Medal (2014), [62] and the Jill Chaifetz Award presented by Advocates for Children (2014.)[63]

References

  1. ↑ “Nomination of Eugene Allan Ludwig to Be Comptroller of the Currency for a Term of Five Years,” U.S. Senate Hearing 103-92, before the Committee on Banking, Housing, and Urban Affairs, March 31, 1993
  2. ↑ Washington Post obituary, "Louise R. Ludwig, Businesswoman," August 28, 1998
  3. ↑ Op. Cit. Nomination hearing record, 1993, page 1
  4. ↑ United States Banker cover story, "Why Eugene Ludwig Makes Bankers Nervous, August 1993
  5. ↑ Washington Post, "Playwright Ken Ludwig's Childhood Dream"
  6. ↑ Ken Ludwig website
  7. ↑ Op. Cit., Nomination hearing record, 1993, pages 2, 43
  8. ↑ “Emeritus, Honorary and Wykeham Fellows,” website of New College, Oxford. Found at: http://www.new.ox.ac.uk/emeritus-honorary-and-wykeham-fellows
  9. ↑ "Businessmen Bemoan Losses to Gray Market, The New York Times, May 3, 1987. Found at: https://www.nytimes.com/1987/05/03/nyregion/businessmen-bemoan-losses-to-gray-market.html
  10. ↑ Michael Quint, “Quicksand for Banks,” The New York Times, March 27, 1990.
  11. ↑ Jerry Knight, “Regulators Offer Steps to Ease Bank Lending,” Washington Post, June 11, 1993
  12. ↑ Resignation letter of Eugene A. Ludwig to President Clinton, January 15, 1998. Found at: https://www.occ.gov/static/news-issuances/news-releases/1998/nr-occ-1998-5.pdf
  13. ↑ OCC Press Release, Supervision by Risk
  14. ↑ Official biography, "Eugene A. Ludwig, Comptroller of the Currency, 1993 to 1998," Office of the Comptroller of the Currency. Found at: https://www.occ.gov/about/who-we-are/leadership/past-comptrollers/comptroller-eugene-ludwig.html
  15. ↑ Op. Cit. Official biography, Office of the Comptroller of the Currency
  16. ↑ White House Press Briefing by Secretary of the Treasury, Lloyd Bentsen, Robert Rubin, Assistant to the President for Economic Policy and Eugene Ludwig, Comptroller of the Currency, December 8, 1993. Found at: http://www.presidency.ucsb.edu/ws/?pid=60001
  17. ↑ Testimony of Eugene A. Ludwig before Re. Maxine Waters' "Forum on Community Reinvestment and Access to Credit: California’s Challenge," Los Angeles, January 12, 1998. Found in: OCC Quarterly Journal, Vol. 17 , No. 2, June 1998, page 28.
  18. ↑ https://www.americanbanker.com/author/eugene-a-ludwig
  19. ↑ Testimony of Eugene A. Ludwig before the Subcommittee on Financial Institutions and Consumer Credit of the House Financial Services Committee, April 15, 2010, page 1. Found at: https://financialservices.house.gov/media/file/hearings/111/04_15_10_ludwig_house_testimony.pdf
  20. ↑ Bill McConnell, "Ludwig Joining Bankers Trust as a Vice Chairman," American Banker, April 22, 1998
  21. ↑ "Ludwig, Partners Organizing Investment Fund," American Banker, January 14, 2000
  22. ↑ Eugene A. Ludwig,"Unregulated Shadow Banks Are a Ticking Time Bomb,” American Banker, March 15, 2016
  23. ↑ The Irish Times, The Ludwig Report
  24. ↑ "Countrywide Under Promontory Review," Business Week, November 28, 2007
  25. ↑ Portfolio.com, "How Gene Ludwig Forced the Countrywide Sale"
  26. ↑ Op. Cit., Business Week, November 28, 2007
  27. ↑ Morgan Stanley news release, "Morgan Stanley Hires Promontory Financial Group to Advise on Banking Holding Company Conversion," September 25, 2008. Found at: https://www.morganstanley.com/press-releases/morgan-stanley-hires-promontory-financial-group-to-advise-on-bank-holding-company-conversion_6958
  28. ↑ Rob Blackwell, “New Pitch: Deposit Insurance Sharing,” American Banker, January 21, 2003
  29. ↑ U.S. Senate Report 111-176, testimony of Eugene A. Ludwig before the Committee on Banking, Housing and Urban Affairs on October 16, 2008.
  30. ↑ Reuters, Bank Plan Could Shorten the Crisis: Ludwig
  31. ↑ U.S. Senate Report 111-176, testimony of Eugene A. Ludwig before the Committee on Banking, Housing and Urban Affairs on September 29, 2009.
  32. ↑ IBM news release, “IBM announces planned acquisition of Promontory to transform regulatory compliance with Watson,” September 29, 2016.
  33. ↑ Op.Cit., IBM news release
  34. ↑ Eugene Ludwig, “Commentary: A Major Technological Turning Point for Finance,” Investor’s Business Daily, December 8, 2016
  35. ↑ Colin Wilhelm, “Is AI the key to regulatory compliance?” Politico Pro, December 23, 2016
  36. ↑ Ludwig speeches
  37. ↑ "America's Economic Challenges," Banking Exchange, April 4, 2018
  38. ↑ Brady, Ludwig, and Volcker, "Resurrect the Resolution Trust Corp.," The Wall Street Journal, September 17, 2008
  39. ↑ Eugene Ludwig, "Another View; Now It's Up to the Regulators," The New York Times, June 25, 2010
  40. ↑ Eugene Ludwig, "Why the Fight Over the Payroll Tax Matters," The New York Times, December 7, 2011
  41. ↑ Eugene A. Ludwig and Paul A. Volcker, "Banks Need Long-Term Rainy Day Funds," The Wall Street Journal, November 17, 2012
  42. ↑ Karey Wutkowski, "Top US Lawmaker, Ex-SEC Chief Blast Lax Regulators," October 16, 2008, Reuters. Found at: http://in.reuters.com/article/financial-sec-idINN1640333520081016
  43. ↑ Eugene Ludwig, “Unregulated shadow banks are a ticking time bomb,” American Banker, March 15, 2016
  44. ↑ Eugene Ludwig, “How America Can Get Out of Its Economic Swamp,” Time, October 3, 2016
  45. ↑ "Bankers Should Resolve to Be More Paranoid in 2018," American Banker, December 20, 2017
  46. ↑ "Getting Ahead of Risk Involves Asking the Right Questions," American Banker, February 9, 2018.
  47. ↑ "America's Economic Challenges," BankingExchange, April 4, 2018, http://www.bankingexchange.com/blogs-3/unconventional-wisdom/item/7475-america-s-economic-challenges?Itemid=639
  48. ↑ Found at: http://www.frbsf.org/community-development/files/cra_past_successes_future_opportunities1.pdf
  49. ↑ Found at: http://group30.org/images/uploads/publications/G30_LessonsLearned2008FinancialCrisis.pdf
  50. ↑ https://www.americanprogress.org/issues/economy/news/2010/04/01/7672/extending-credit-to-lower-income-americans-safely-and-fairly/
  51. ↑ https://www.promontory.com/uploadedFiles/Articles/Insights/131031_Ludwig_GW_Remarks.pdf
  52. ↑ Found at: http://fcic.law.stanford.edu/interviews/view/52
  53. ↑ Bloomberg Radio interview with Arthur Levitt, January 1, 2017
  54. ↑ Found at: https://fconline.foundationcenter.org/grantmaker-profile/?key=LUDW016&view_format=compact
  55. ↑ Found at: http://naf.org/about/board-of-directors
  56. ↑ Found at: http://users.ox.ac.uk/~sfop0114/nclm4/nclm4.html
  57. ↑ Found at: https://law.yale.edu/studying-law-yale/clinical-and-experiential-learning/our-clinics/ludwig-center-community-economic-development
  58. ↑ "Haverford College Endowed Internships," found at: https://docs.google.com/document/d/1FGCLiqRBtS4oXxUZGVBHGTopC867qlLdDQgLS2WT7iA/edit
  59. ↑ http://www.promontory.com/Bios.aspx?id=1022
  60. ↑ "Leadership Awards Abound,” New York Social Diary, June 13, 2011. Found at: http://www.newyorksocialdiary.com/party-pictures/2011/leadership-awards-abound
  61. ↑ http://ccl.yale.edu/simeon-e-baldwin-award/recipient-list
  62. ↑ Victoria Finkle, “Promontory’s Ludwig Wins Foreign Policy Medal,” American Banker, February 28, 2014.
  63. ↑ Found at: http://www.advocatesforchildren.org/sites/default/files/on_page/NP_sb_journal_2014.pdf?pt=1
Government offices
Preceded by
Robert L. Clarke		 Comptroller of the Currency
1993–1998		 Succeeded by
John D. Hawke, Jr.
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