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REORGANIZATION PLAN NO. 1 OF 1950
TUESDAY, APRIL 11, 1950
UNITED STATES SENATE,
The committee met, pursuant to call, at 10 a. m., in room 357, Senate Office Building, Senator John L. McClellan, chairman of the committee, presiding.
Present: Senators McClellan (chairman), O'Conor, Benton, Ives, and Schoeppel.
The CHAIRMAN. The committee will come to order.
We will begin hearings as per schedule this morning on the President's Reorganization Plan No. 1.
At this point in the record I wish to insert the President's message transmitting the plan and also the plan.
I also wish to place in the record at this point Senate Resolutions 246 and 247, disapproving the plan, introduced respectively by Senator Robertson and Senator Capehart.
I wish also to insert in the record the Senate committee staff memorandum with reference to the plan, an analysis of the plan supplied by the staff of this committee.
I wish to also place in the record a letter from the Secretary of the Treasury dated April 7, 1950, commenting upon the plan and expressing his views about it.
Also a letter from Mr. Preston Delano, Comptroller of the Currency, in which he declines to comment on the plan.
(The documents referred to follow:)
[H. Doc. No. 505, 81st Cong., 2d sess.]
MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING REORGANIZATION PLAN No. 1 OF 1950 PROVIDING FOR REORGANIZATIONS IN THE DEPARTMENT OF THE TREASURY
To the Congress of the United States:
I transmit herewith Reorganization Plan No. 1 of 1950, prepared in accordance with the Reorganization Act of 1949 and providing for reorganizations in the Department of the Treasury. My reasons for transmitting this plan are stated in an accompanying general message.
After investigation I have found and hereby declare that each reorganization included in Reorganization Plan No. 1 of 1950 is necessary to accomplish one or more of the purposes set forth in section 2 (a) of the Reorganization Act of 1949. I have found and hereby declare that it is necessary to include in the accompanying reorganization plan, by reason of reorganizations made thereby, provisions for the appointment and compensation of an Administrative Assistant Secretary of the Treasury. The rate of compensation fixed for this officer is that which I have found to prevail in respect of comparable officers in the executive branch of the Government.
The taking effect of the reorganizations included in this plan may not in itself result in substantial immediate savings. However, many benefits in improved operations are probable during the next years which will result in a reduction in expenditures as compared with those that would be otherwise necessary. itemization of these reductions in advance of actual experience under this plan is not practicable. HARRY S. TRUMAN.
THE WHITE HOUSE, March 13, 1950.
REORGANIZATION PLAN No. 1 of 1950
Prepared by the President and transmitted to the Senate and the House of Representatives in Congress assembled March 13, 1950, pursuant to the provisions of the Reorganization Act of 1949, approved June 20, 1949
DEPARTMENT OF THE TREASURY
SECTION 1. Transfer of functions to the Secretary.—(a) Except as otherwise provided in subsection (b) of this section, and subject to the provisions of subsection (c) of this section, there are hereby transferred to the Secretary of the Treasury all functions of all other officers of the Department of the Treasury and all functions of all agencies and employees of such Department.
(b) This section shall not apply to the functions vested by the Administrative Procedure Act (60 Stat. 237) in hearing examiners employed by the Department of the Treasury.
(c) Notwithstanding the transfer to the Secretary of the Treasury of the functions of the United States Coast Guard and of the functions of the Commandant of the Coast Guard, effected by the provisions of subsection (a) of this section, such Coast Guard, together with the said functions, shall operate as a part of the Navy, subject to the orders of the Secretary of the Navy, in time of war or when the President shall so direct, as provided in section 1 of the Act of January 28, 1915 (ch. 20, 38 Stat. 800, as amended, 14 U. S. C. 1).
SEC. 2. Performance of functions of Secretary.—The Secretary of the Treasury may from time to time make such provisions as he shall deem appropriate authorizing the performance by any other officer, or by any agency or employee, of the Department of the Treasury of any function of the Secretary, including any function transferred to the Secretary by the provisions of this reorganization plan. SEC. 3. Administrative Assistant Secretary.-There shall be in the Department of the Treasury an Administrative Assistant Secretary of the Treasury, who shall be appointed, with the approval of the President, by the Secretary of the Treasury under the classified civil service, who shall perform such duties as the Secretary of the Treasury shall prescribe, and who shall receive compensation at the rate of $14,000 per annum.
SEC. 4. Incidental transfers.-The Secretary of the Treasury may from time to time effect such transfers within the Department of the Treasury of any of the records, property, personnel, and unexpended balances (available or to be made available) of appropriations, allocations, and other funds of such Department as he may deem necessary in order to carry out the provisions of this reorganization plan.
[S. Res. 246, 81st Cong., 2d sess.]
Resolved, That the Senate does not favor the Reorganization Plan Numbered 1 of 1950, transmitted to Congress by the President on March 13, 1950.
[S. Res. 247, 81st Cong., 2d sess.]
Resolved, That the Senate does not favor the Reorganization Plan Numbered 1 of 1950 transmitted to Congress by the President on March 13, 1950.
SENATE COMMITTEE ON EXPENDITURES IN THE EXECUTIVE DEPARTMENTS APRIL 7, 1950.
Staff Memorandum No. 81-2-49. Subject: Reorganization Plan No. 1 of 1950, providing for reorganization within the Department of the Treasury.
This memorandum supplements staff memorandum 81-2-40 which discussed plans 1 through 6 as a whole. These six plans centralize scattered functions by transferring to individual department heads "all functions of all other officers of (the Department) and all functions of all agencies and employees of such department," except those of hearing examiners, and a few specified Government corporations and boards. The plans tackle "the first and essential step in the search for efficiency and economy (by eliminating) the present diffusion of authority and confusion of responsibility" in line with the four following numbered recommendations in Hoover Commission Report No. 1 on General Management.
HOOVER COMMISSION RECOMMENDATIONS
"14. Under the President, the heads of departments must hold full responsibility for the conduct of their departments. There must be a clear line of authority reaching down through every step of the organization and no subordinate should have authority independent from that of his superior.
"16. Department heads must have adequate staff assistance if they are to achieve efficiency and economy in departmental operations.
"18. Each department head should receive from the Congress administrative authority to organize his department. * * *
"20. We recommend that the department head should be given authority to determine the organization within his department.
PROVISIONS AND EFFECT OF PLAN NO. 1
This memorandum develops further those considerations particularly related to plan No. 1, as to which two resolutions of disapproval were introduced on March 31, 1950, by Senators Robertson (S. Res. 246), and Capehart (S. Res. 247). Hearings will be held on these two resolutions on April 11 and 12, 1950. Witnesses will include Senators Robertson and Capehart; the Director of the Bureau of the Budget; the American Bankers Association; and representatives of other banking groups.
Section 1 of plan No. 1 transfers to the Secretary all functions scattered throughout the Department of the Treasury, except the functions of hearing examiners and except the operations of the Coast Guard which becomes a part of the Navy in time of war or when the President so directs. The three other sections of plan No. 1 authorize the Secretary to delegate functions; to appoint an Administrative Assistant Secretary, with the approval of the President, under the classified civil service at an annual salary of $14,000; and to make those transfers of records, property, personnel, and funds which are required to carry out this plan. The statutes controlling the Treasury Department lodge most of the departmental functions in its major operating units, and, hence, plan No. 1 would shift to the Secretary the powers now scattered among the (1) Office of the Comptroller of the Currency, (2) Bureau of Internal Revenue, (3) Bureau of Customs, (4) Bureau of Narcotics, (5) Bureau of the Mint, (6) Bureau of Engraving and Printing, (7) Fiscal Service, (8) United States Secret Service, and (9) United States Coast Guard.
Since the opposition to plan No. 1 has centered on the Office of the Comptroller of the Currency, the following legal citations are limited to the statutory provisions governing his activities, as amended to date (title 12, U. S. Code).
"SECTION 1. There shall be in the Department of the Treasury a bureau charged with the execution of all laws passed by Congress relating to the issue and regulation of a national currency secured by United States bonds and, under the general supervision of the Board of Governors of the Federal Reserve System, of all Federal Reserve notes, the chief officer of which bureau shall be called the Comptroller of the Currency, and shall perform his duties under the general directions of the Secretary of the Treasury.
1 The information up to this point was included in staff memorandum 81-2-40 discussing plans 1-6, but was inadvertently omitted by the printer in the reprint of that memorandum in the appendix of the Congressional Record of April 3, 1950 (p. A2583).
"SEC. 2. The Comptroller of the Currency shall be appointed by the President, by and with the advice and consent of the Senate, and shall hold office for a term of 5 years unless sooner removed by the President, upon reasons to be communicated by him to the Senate; and he shall receive a salary at the rate of $15,000 a year.' (The provisions of the 1864 statute dealing with Comptroller appointments, also required the recommendation of the Secretary of the Treasury; this provision was eliminated in 1935.)
VIEWS ON PLAN NO. 1
A total of 376 communications from 37 States dealing with plan No. 1 has been received to date, all except one being in opposition to the plan.
A letter has been received setting forth the views of the Secretary of the Treasury, and will be submitted for the record at the hearing.
* * *
The American Banker, banking newspaper, is opposing centralization of Treasury functions because it "would detract from the prestige and authority of the self-supporting Office of the Comptroller of the Currency. This old Office supervises and controls national banks, especially through regular examinations, meets with the FDIC, and reports to Congress. The newspaper states that few bankers will "question the present Secretary of the Treasury since he was, at one time, a national bank examiner (but) future Secretaries of the Treasury might, in effect, virtually end the Office's time-honored functions." and adds that the merger of Treasury and Comptroller legal divisions under Mr. Morgenthau's regime "in effect, ended the assumed independence of the Comptroller.' With respect to the latter "merger" of the legal divisions, of the Treasury Department, and of the Office of the Comptroller of the Currency, it is stated that the establishment of the new Office of General Counsel in the Treasury in 1934 did not change the legal work performed by the Legal Division of the Comptroller's Office. A possible exception to this statement would be that, whereas the legality of all considerations pertinent to the operations of the Office of the Comptroller of the Currency were handled by the Legal Division of that agency prior to 1934, the statute passed in the latter year would require joint legal work on legal questions of a Department-wide scope.
The basic question before the committee is whether ultimate authority over all Treasury Department functions should be centralized in the Secretary, as is proposed in general in plans 1-6. In connection with plan No. 1, however, consideration must also be given to two somewhat conflicting statutory provisions. On the one hand, the statutes specifically authorize the Secretary of the Treasury to issue "general directions to the Comptroller of the Currency." On the other hand, since 1935, they have given the Comptroller the more independent status usually associated with a Presidential appointee; in that year a legislative amendment eliminated the long-time requirement that the Secretary of the Treasury must make recommendations in connection with appointments of Comptrollers.
HERMAN C. LOEFFLER,
THE TREASURY DEPARTMENT,
Hon. JOHN L. MCCLELLAN,
Chairman, Committee on Expenditures in the Executive Departments,
United States Senate, Washington, D. C.
MY DEAR SENATOR: I want to thank you for your letter of April 4, informing me of the scheduled hearings with respect to the President's Reorganization Plan No. 1 of 1950 and inquiring if I desired to be heard by the committee. Although I have no wish to testify, I do want to cooperate with the committee to the fullest extent possible and therefore take this opportunity to submit my views with respect to certain aspects of the plan.
I am in full accord with the fundamental principles of the reorganization plans recently submitted to the Congress by the President. Reorganization Plan No. 1 relates exclusively to the Treasury Department and I am in accord with its pro
visions, except to the extent that it would transfer the functions of the Bureau of the Comptroller of the Currency to the Secretary of the Treasury.
In view of the considerable discussion of this matter in recent weeks, it is unnecessary for me to dwell at length upon the history and status of the Office of the Comptroller of the Currency. The primary responsibility of that Bureau, which it has discharged for almost a century, is the supervision and regulation of the national banking system. This important function, which relates to institutions holding over half of the Nation's commercial banking resources, is performed by a relatively small, closely knit organization of career employees. The national banking system, and its supervision by the Comptroller of the Currency, have served as models for the banking systems of the various States and for their supervisory principles and practices.
Effective governmental regulation of national banks has rested at all times upon the exclusive preoccupation of this Bureau with the well-being of the individual banks and their performance of all the banking services called for by a vigorous and expanding economy. With very few exceptions, the individual banks of the national banking system have consistently responded to the recommendations and suggestions of the Comptroller of the Currency, and this has been true, to a considerable extent, because of their realization that the Comptroller's office is not only thoroughly and intimately acquainted with the affairs of all national banks, but has no other purpose or function than maintaining the soundness and progress of those banks.
I need hardly stress the value of such a relationship of trust and confidence, built up over many years of contact through carefully worked-out and consistently applied examination and supervisory procedures. By virtue of this relationship, with which the directors and officers of every national bank have been familiar throughout their banking careers, the Comptroller's office serves as a coordinating, steadying, and vitalizing force in the entire banking system. In the course of his duties, the Comptroller of the Currency exercises a number of quasi-judicial powers of great importance. In my judgment, it is highly desirable that all such functions in this field should be performed by an official whose duties are definitely and permanently related to the national banking system along. It should be borne in mind that under present law the Comptroller performs his duties "under the general directions of the Secretary of the Treasury," and this provides an entirely adequate integration of the general policies of the Bureau with those of the Department.
If Reorganization Plan No. 1 of 1950 became effective, I would use my full powers thereunder to preserve the continuity of this Bureau in all possible respects in order to maintain a situation which, in my opinion, is most beneficial both to the national banking system and to the general economy. However, it must be borne in mind that my policy in this respect would not necessarily be maintained by future Secretaries of the Treasury.
It is my firm conviction that a vigorous national banking system is essential to the economy of this country. It not only acts as a pacemaker, as I intimated above, for the State banking systems, but also serves to provide competition for those systems; and hence increases their strength as it increases its own. also my belief that the national banking system would not long remain intact, strong, and vigorous without leadership by the Bureau of the Comptroller of the Currency, which has no other function than its supervision and administration. The preservation of that system is more important than creating a new channel of authority where no need therefor appears.
In its report to the Congress on General Management of the Executive Branch, the Commission on Organization of the Executive Branch of the Government (the Hoover Commission) summarized the principles which, it felt, should govern the organization and administration of the Government. This summary emphasized the importance of managing the operations of the executive branch effectively, responsibly, and economically. It is difficult to see how the operations of the Office of the Comptroller of the Currency could be performed with greater effectiveness or responsibility. As for economizing, that Bureau is one of the few administrative agencies of Government that uses no tax funds; it is supported entirely by assessments upon the banks it supervises. For the foregoing reasons, I doubt the advisability of the proposed transfer of the functions and powers of the Comptroller of the Currency. In all other respects the plan has my unqualified endorsement.
JOHN W. SNYDER, Secretary of the Treasury.