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and not by appropriated funds and if he should be dismissed by the President, the reasons must be reported to the Senate.

Further evidence of the policy of Congress to make the Office of the Comptroller of the Currency independent of the Secretary of the Treasury, even in recent years, can be found in the fact that while originally the Comptroller was appointed by the President, with the advice and consent of the Senate, on the recommendation of the Secretary of the Treasury, Congress in 1935 eliminated the provision for the Secretary's recommendation.

The independence of this Office is well illustrated by the opinion rendered to President Taft in 1912 by Attorney General Wickersham when he said: “While the Comptroller is performing quasi-judicial functions, his discretion cannot be controlled by you * * * even though with respect to other duties he acts under the general direction of the Secretary of the Treasury."

These safeguards of independence which Congress has for 87 years thrown around the Office of the Comptroller to insure the impartial exercise of the great powers and functions lodged in that office would disappear if Reorganization Plan No. 1 becomes law.

The power of life and death over about 5,000 banks holding more than 50 percent of the banking resources of this country would pass into other less independent hands. Likewise would pass the general supervision and examination of the banks with power to control and shape credit policies which could lead to political domination and control of the money and credit of this country, the business lifeblood of all our communities and citizens.

The potentialities presented should be the concern of all, whether Democrat or Republican, even though one cannot be apprehensive of the actions of the present Secretary of the Treasury if vested with such powers and functions. But the use of such powers by a future Secretary in such a way as not to be conducive to sound banking or for the general public welfare cannot be assumed. Political considerations are often demanding and the urge to exercise power hard to resist. A Secretary of the Treasury confronted with the necessity of floating the public debt and clothed with the enumerated powers now vested in the Comptroller of the Currency could enforce a demand for contraction of credit in loans and the heavy investment in Government securities or as was done during the day of the United States Bank, the withdrawal of credit in a section of the country, to its ruin, where its votes were not deemed to be properly cast.

The reorganization plan is not the so-called Hoover plan. It was designed by the Budget Bureau. As applied to the Comptroller of the Currency's Office, it can only be assumed that they know not what they do. Certainly none of the five objections for which Congress directed the Commission to submit plans, is involved. There is no limiting of Federal expenditures, since appropriated funds are not expended in carrying on the functions of such office. Likewise, no nonessential or duplicated services are involved or are any executive functions limited. On the contrary, the plan, if put into execution, could lead to confusion, nonefficient and cumbersom administration.

Congress has by grants of final authority and concentration of responsibility placed in one office the supervision of the national banking system.

Reorganization Plan No. 1 of 1950 inevitably would destroy this invaluable service rendered by the Office of the Comptroller. A Secretary of the Treasury who was so. inclined could delegate any of the functions now performed by the Comptroller of the Currency to any other agency or employee of the Department, however ill-equipped or unsuited to perform the particular functions. National bankers who had problems confronting them could rarely discuss them with the Secretary of the Treasury, who would have final authority in making the decisions, because as a Cabinet officer he has so many duties to which he must devote time and attention. The Secretary's complex duties at the present time are such as to prohibit him from giving his personal attention to problems of individual banks. He must confine his activities to making decisions on broad national policies, and there can be no doubt that successful bank supervision demands the closest personal attention of those who are charged with its administration.

A Secretary of the Treasury might destribute the functions of the Comptroller's office to a number of persons with diverse and even conflicting policies. For example, he could vest the chartering power in one employee, the power to grant branches in another, and different segments of supervision in others, thereby losing the consistency and harmony of policies which have long been dominant factors in molding the national banking system and improving its strength and efficiency.


The national banking system could not long exist on its present high level in the absence of a bureau with the degree of autonomy, authority, and responsibility, the singleness of purpose and the general objectives now embodied in the Office of the Comptroller of the Currency. That Bureau is the very heart and core of the national banking system, having created all of its units and supervised their growth. The national bankers of this country look to this compact, single-purposed organization for guidance and leadership, and such a change in its status as would be made by Reorganization Plan No. 1 would cause irreparable damage not only to the national banking system but to all American banking generally. Without that independent bureau around which national banking is built, the unit banks would lose the organization which now binds them into the kind of a system intended by Congress to serve the people and stand as a model for the various State systems.

Furthermore, Reorganization Plan No. 1 would vest in the Secretary of the Treasury the power to take over the funds of the Comptroller's office derived from assessments against national banks and to use them for other purposes. It is assumed that the other purposes would have to be related purposes, but even so, it is highly questionable that funds derived from examination fees paid by national banks should be used for any purposes other than the administration and supervision of the national banking system by an independent agency having the sole responsibility.

At the present time competition between the national banking system and the various State banking systems is on a high plane chiefly because of the relationship between the office of the Comptroller of the Currency and the respective State bank supervisory authorities, as well as the relationship between the Comptroller and the other two Federal bank supervisory agencies. All of these relationships would be destroyed because every other agency would assume that the Comptroller could not speak authoritatively with respect to either the national banking system or the functions and policies of his office, since the Secretary of the Treasury would always be in a position (if he had not already delegated the functions to some other employee of the Department) to overrule his positions. Furthermore, these relationships would be seriously impaired by destroying the prestige and authority of the Comptroller and they could not be rebuilt by the Secretary of the Treasury because of the difference between his position as a Cabinet officer and the position of the respective State and Federal bank supervisory authorities. Since one of the functions of the Comptroller is to serve as a director of the Federal Deposit Insurance Corporation, the Secretary would-under this reorganization plan-be a director and vice chairman of that corporation. By virtue of the prestige of his Cabinet position, he would effectively control the Corporation. Hence, control of two of the three Federal bank supervisory agencies would be concentrated in the hands of the Secretary. Under these circumstances, it is questionable whether the third supervosiry agency-the Federal Reserve System-could long remain undominated, if a Secretary of the Treasury were inclined toward complete consolidation, a possibility which is alarming to all of our bankers.

As previously pointed out, the intent of Congress, as indicated by legislation from Lincoln's administration to Franklin D. Roosevelt's, has been to keep the Comptroller's office free from political influence, and up to this time that intent of Congress has been faithfully carried out. It should not now be changed.

[From the United States Investor, April 8, 1950]



Unless the men operating the national banks of this country-whether as officers or directors make their opinions felt at Washington presently, they may live to regret their inertia. There is a threat to the national bank system in the bill, known as Reorganization Plan No. 1, and that threat is no figment of the imagination. Let this bill go through, and let its provisions become effective, and the factor which has done much to make the national banks great will be destroyed beyond recall. We refer to the large degree of independence, from political or other interference, which the national bank system has enjoyed for years.

Under that independence, the national banks have become what they are and the bureau which watches over them at Washington has developed into an exceedingly useful agency. Without that independence, the life of national bank men will be less enjoyable and the sturdy quality which has been inherent in the whole national bank idea may easily lose much of its sturdiness. One does not

like to think of the national bank system of the years ahead as no longer a thing by itself. It ought to be allowed a continued independence.


The men who operate national banks-officers and directors alike—are trustees of a great heritage. For more than 85 years, the national bank system has been the backbone of American banking. It has lived through several eras of banking history, first in a period when there were few State banks and no Federal Reserve System, then in a period which its dominance was challenged by the increasing number of State banks and by their growing popularity and more recently in a period when the banking industry has comprised national banks, State banks, the Federal Reserve System and the Federal Deposit Insurance Corporation. In every one of those eras it has represented uniformity, with a high standard of banking wherever national banks were to be found. Men moving from place to place found that State banks differed materially as between States, but not so the national banks.

When legislation for banks was being proposed in any of the States, it was usually to some feature of the National Bank Act that the legislators turned for their model. And if it be true, as it so generally appears today, that State banks and national banks have come to possess a more nearly uniform quality than ever before, one major reason for this is that the spirit which has actuated the National Bank Act from the very beginning has spread until most of the 48 State banking codes have come to share a similar spirit.


A central feature of this great heritage is the Office of Comptroller of the Currency. Quite apart from the fiber of the men who have held that Office over the years, and some of them have been exceedingly potent factors in the cause of good banking, the Office itself has grown steadily in importance. It has never been doing a better job than it is doing today. You will probably recall that from the beginning, that Office has had a double assignment. First, it has had the task of holding the national banks true to quality through strong supervision. National bank examinations are proverbially exacting and therefore proverbially good. The second assignment given by law and practice to the Comptroller of the Currency is less generally known but is of primary importance that of being the spokesman for the national banks before Congress. Somehow it has almost always been true that the national banks of a given area have had no such host of spokesmen to rally in their behalf before Congress as the State banks have had, what with their State commissioners and their respective Members of Congress. The national banks have always needed someone to present their side of the case when they have been assailed or have asked for the larger business opportunities which old-time laws did not accord to them. The authors of the National Bank Act were far-sighted men in many respects, as the subsequent history of the national bank system has abundantly proved, but in no respect were they more far-seeing than when they provided that the Comptroller of the Currency should always make his annual report direct to Congress. He was not to salaam to any member of the Cabinet or other high official. Although his relation to the Treasury Department was to be intimate, he was to be no underling of that division of Government. He was to be spokesman for the national banks with the right to speak direct to Congress. He was not to need any other Government figure to relay his message to the men who make the laws for the country.


Anybody familiar with banking history can recall how effective_the_voice of the Comptroller has been on more than one occasion with Members of Congress. Comments which the first of the Comptrollers, Hugh McCulloch, made on the duties of bank examiners are quoted to this very day. When Henry M. Dawes, a more recent Comptroller, went before committees of Congress to lift national banks out of the archaic groove in which the then law held them, Congress enacted

his proposal almost word for word as he had drafted it. Still another incumbent of the Office, John W. Pole, was characterized by Carter Glass, no mean judge of financial greatness, as the ablest Comptroller he had ever known.

It was not by chance that the original authors of the Federal Reserve Act made the Comptroller of the Currency an ex officio member of the Federal Board along with the Secretary of the Treasury, nor just an incident that the Comptroller was made one of the three members of the Board of the Federal Deposit Insurance Corporation. The thought all the way through here has been of him as spokesman for the national banks, and because of that assignment, the national banks have stood in infinitely stronger position at Washington whenever any development has seemed to threaten their welfare.



What must concern thoughtful national bank men at this juncture, however, is not merely that the independence of the Comptroller's office is threatened, but that this comes at a time when the national banks are operating under better Federal supervision than has ever existed before. It is a huge staff which the Comptroller's office directs in the examination of the 5,000 national banks. last accounts, if we remember correctly, there were over 1,000 of these men— some 400 of them ranking as senior examiners and the other 600 as assistant examiners. They have real responsibilities, these men, and if they are to hold the course true among banks, they must have the quality that earns and holds the respect of the men who operate national banks. More and more, over the years, have they had to be men of personality, for they have had more and more occasion to sit in with boards of directors or committees of boards. They must have qualities which engage the respect of those outstanding local businessmen who comprise boards of directors, even as they must be able to have the respect of the ablest men acting as officers of banks. So the task of picking and training the national bank examiner has now become one of the most important tasks which the Comptroller's office faces.


It is significant of that respect which the Comptroller's office has won with Congress that candidates for the examining staff no longer look to political influence to get them a start. Not one examiner of recent years owes his position to the endorsement or intervention of either Senator or Representative. Each has been picked for his individual merit. A good student record on the economics side of a good college or similar institution, for instance, has counted strongly. The fact is that chief national bank examiners are asked to keep their eyes open for likely men of good standing in educational institutions who have indicated some interest in a bank-examining career. There you have one source from which much of the examining staff is recruited.

Now as to the training. The men are started as assistant examiners and -work, of course, under the direct tutelage of senior examiners. Thus they begin living in the atmosphere of bank examinations. But their training is much broader than that. Those 600 assistant examiners begin at once to take courses with the American Institute of Banking, that great educational organization which the American Bankers Association conducts. That is, they are subjected to the same broadening educational influence which heads of banks all over the country are choosing for their likely employees, frequently at the bank's expense. Meantime, what with their daily work and their studies, the assistant examiners are advancing steadily in quality and responsibility and by the time they complete their American Institute of Banking courses, they have become broad-gage, well-informed men whose opinions operating bank men are pretty apt to regard with respect. It is said that some 50 men from the national bank examining force are taken away each year to become officers of banks. Some of the men trained with the institute prove themselves worthy of still further education and they become students at the graduate school which the American Bankers Association conducts at Rutgers University or at similar schools in Wisconsin or on the coast.


We sometimes think, however, that the greatest schooling which these examiners get is at that conference to which the chief national bank examiner in each Federal Reserve district summons his examiners and assistant examiners in the first half of each year. It lasts for several days and it has a seriousness of purpose that

any conference of bankers or businessmen cannot help but respect. Plenty of shop talk there is, of course, for the chief examiner knows, from his examiners' reports of occurrences at the banks, of features which can well be discussed for the benefit of everybody present. Yet those familiar with these gatherings will testify that splendid talks by authorities from outside the examining force have frequently been extremely helpful in creating a correct attitude toward many problems which examiners must face in the course of their work.

We well remember one such talk, given 2 or 3 years ago, at the meeting of the examiners and assistant examiners of the second Federal Reserve district, that which includes New York State, about half of New Jersey and one county of Connecticut. Several national banks of that area were becoming more and more interested in short-term loans to farmers. They felt, after a time, that such paper was being looked at askance by the bank examiners. To tell the truth, it was an unfamiliar kind of paper to many of the examiners and equal regard for the truth compels one to add that the files of the banks themselves did not provide sufficient material at that time to help examiners in forming their impressions.

So, while some of the alert leaders among the banks set out to remedy this lack of information in the files, and produced the now widely known file which Federal Reserve banks are distributing, the chief national bank examiner of New York promptly undertook his part. Besides conferences with individual examiners or groups of them, he brought the whole body of examiners and assistant examiners of his district together and had them hear a talk by Dr. Van B. Hart, than whom there could be no better instructor on the essentials of sound farmer credit. That sort of helpful outside contribution has been repeated in other districts. Each chief examiner has regarded himself as charged with a responsibility to make his staff well informed on bankers' problems and eager to keep abreast of each new banking development.


The Comptroller's office follows a similar policy in the second half year except that, this time, it is the 12 chief examiners of the country who are called together for conference in Washington. These conferences have had the enthusiastic leadership of Chief Deputy Comptroller Robertson from the very beginning. Take the meeting held late in 1949 as a specimen of the nature of such meetings. This one lasted for 3 days and, believe you me, those were 3 working days with none of the entertainment aspects that so often mark gatherings of bankers or businessmen.

On the first day, the chief examiners met with the deputies and Chief Examiner Folger. (You will remember that under the present organization of the Comptroller's office there is a chief deputy and then other deputies, each directly in charge of a group of district chief examiners.) On that day, the Chief Deputy and his associates outlined the ideas which have been accumulating with them since the last similar meeting, and they called upon the district chief examiners to do likewise. As a result, there was an exceptionally free exchange of ideas and a great many helpful conclusions.

The second day was divided between two features, a very thorough explanation to the examiners of the operations of the International Bank for Reconstruction and Development. Probably you know that this institution is often described as one of the best organized and best conducted banks in the country. Good corroborative testimony to that effect is the willingness of some of our best managed mutual savings banks and other large institutional investors like the insurance companies to purchase this bank's bonds. Each of the leading figures in the bank was brought in to explain how this institution makes loans, how it studies credits of countries and plans the set-up of a loan when granted, and then how it keeps watch over the use of the proceeds of the loan after the making. In the afternoon of this same day, the chief examiners heard discussions by a particularly good economist on general conditions and by an authority on bank portfolios and then by men close to deposit insurance and to FHA loans. This was very practical material and useful to examiners in their everyday activities.

The third day the 12 district chief examiners met with their respective deputies for one of the most thorough appraisals of the problems of each district that can be imagined. Before the meeting, each district chief examiner had been asked to analyze conditions in some individual banks of his district and to bring in a collection of problem cases. Meantime, the deputies had assembled some similar data from their study of reports from examiners. There you have contacts with conditions at the very grass roots, so to speak, and they led to well-considered conclusions for the guidance of examiners in the days ahead. In some cases, the work

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