It is hardly unheard of for government agencies to repeatedly promote their most incompetent employees, while creating conditions that cause their most competent ones to flee. It’s a staple of life in the public sector. Normally this sort of practice is merely irritating, but a promotion that occurred at the OCC this week—the elevation of our old pal Tim Long to chief national bank examiner and chairman of the Committee on Bank Supervision—is much worse than that. It threatens (and I’m only half kidding) to make the global credit slowdown even worse than it already is.

Tim Long is the wrong guy for the chief examiner’s job, at exactly the wrong time. Regular readers know I’ve been a non-fan of Long for many years, and for good reason. He’s a regulatory bully who I’ve long believed cares less about the safety and soundness of the banking system than he cares about puffing up his own ego. In examination after examination Long has headed, he has repeatedly demanded that bank managements and their boards follow his every dictate, no matter how outrageous, even when those demands are totally unwarranted by the facts.  The result, again and again, has been ridiculously excessive loan writeoffs, excessive loan loss reserves additions, loan sales at fire-sale prices, and the ousters of highly competent, knowledgeable CEOs. If you doubt it, go back and look at the havoc Long caused at Wells Fargo in the 1990s. When all was said and done, it turned out that, in the commercial real estate portfolio alone, he forced the bank to over-reserve by $1 billion—and back then, $1 billion was a lot of money. Wells Fargo still had recoveries last year from loans Long forced the bank to write down back in 1991.The Wells experience is typical of his style.

I don’t need to tell you that Long-style regulation is exactly what the banking system doesn’t need now. His appointment is almost certainly bad news for bank shareholders, who will have to endure unnecessarily high reserve costs. But it’s bad news for the financial system, too. The financial hari-kari Long will force many banks to commit will almost certainly cause them to have to pull back on lending. That’s a good thing? Back in the 1990s, the Fed had to step in as a result of the damage Tim Long inflicted. The banking system doesn’t need to see the same kind of damage happen now.

I last wrote about Tim Long back in July after, true to form, he forced Commerce Bancorp’s board of directors to push out CEO Vernon Hill because Hill wouldn’t kow-tow to Long’s idiotic demands.  After that piece ran, I was inundated with emails from individuals, many of whom had worked for Wells Fargo and First Interstate in the 1990s, who had their own Tim Long stories. The stories all told of his bullying activities.

How could the Comptroller of the Currency, John Dugan, not have fired Tim Long for his past practices is beyond me. But promoting him to national bank examiner--particularly at this point in the credit cycle--makes me apoplectic! No one at the OCC is better suited to make the current problems worse than Tim Long. Dugan, what in the world are you thinking?