IBM acquires Promontory

(Photo credit: Wikipedia)

At first glance, this is an odd marriage. Former regulators paired with data geeks? And at second glance, it looks odder still. Promontory was Gene Ludwig's baby. It was run like the quintessential private consulting firm, with cards held closely to the chest – and now it's being bought by a public company? The blogosphere is crackling with theories: Couldn't Gene find a successor?

Promontory Financial Group was started in 2001 and positioned itself between banks and their regulators. Gene repeatedly insisted Promontory was not a lobby group, but instead was geared towards helping banks understand and implement both the letter and the spirit of new regulations. Indeed, Gene has been an advocate for radical transparency in banks, and a frequent critic of laggard banking efforts to own up to their compliance shortcomings. To that end he has hired former regulators, and not just street-level government employees but big guns like Julie Williams, former chief counsel at the OCC, or Mary Schapiro, former chairman of the U.S. Securities and Exchange Commission. Promontory became the go-to consulting firm for banks facing regulatory challenges, but with the onset of the 2007 crisis some of Promontory's successes put it in hot water over clients like MF Global and Standard Chartered. Some this week are speculating that the blowback from these legal troubles, coupled with Promontory's prominent involvement in the OCC's and Fed's failed Independent Foreclosure Review process, may have pushed a wounded Promontory into the arms of an unlikely suitor. We disagree; we've uncovered no indication in our research efforts this year that Promontory's core "bank doctor" business has been damaged or compromised. Banks still turn to Promontory for expert compliance remediation help.