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extended over into a fourth day, for the Comptroller's office believes that when the men right on the ground and the men supervising from Washington meet face to face and canvass problematic situations with each other, the resulting program will be fair alike to the cause of sound banking and to the management of the individual banks.


We submit from what we have said above that the whole process of examining of national banks is at present at a very high peak of efficiency. Into the planning of this supervision has gone an immense amount of experience and judgment. To deprive the bureau of the Comptroller of the Currency of the independence it has had for some 85 years would be a most unfortunate course for Congress to sanction. The bureau ought to be maintained in the sturdiest of independence, encouraged to strive as it has been doing for the very topnotch of efficiency in examinations, and encouraged likewise to regard itself as the spokesman for the national banks. They do need a spokesman. They are not just another group of banks, differing from State banks and trust companies only in name. They are the Nation's own banks, as distinguished from the States' banks; they are the backbone of the Federal Reserve System, and without them that System would be in real jeopardy. They represent the highest possible standards of banking and they represent a uniformity of quality that 48 separate State banking systems can never supply. To tamper with such a system is a dangerous proceeding and the national banks of the country ought to register their objection to any such procedure most emphatically with their Senators and Representatives.

Senator CAPEHART. I find no reason to believe that the best interests of the Nation will be served by approving this reorganization. I find much in favor of not doing it. I am willing in this instance, inasmuch as I can find no degree of pressure or no degree of selfishness on the part of the bankers, and since, as far as I am concerned, they are unanimous, at least every letter or wire I have received has been unanimous, I have not received a single wire or letter from a single bank being opposed to it, I am willing to recommend as strongly as I know how that we disapprove Reorganization Plan No. 1. The CHAIRMAN. Any questions?

Thank you very much, Senator Capehart.

Senator CAPEHART. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Lawton, will you come around, please, sir? Mr. Lawton, in view of the resolutions of disapproval which have been introduced by the two Senators, the committee is very much interested in having the views of the Bureau of the Budget on this particular plan. We will be very glad to have you proceed and present the budget's position. You may give us any arguments for it, if that is the position of the budget, that may justify the committee in finding that the plan will conform to the general policies of reorganization and bring about greater efficiency and economy. You may proceed. STATEMENT OF FREDERICK J. LAWTON, ASSISTANT DIRECTOR, BUREAU OF THE BUDGET, ACCOMPANIED BY FRED E. LEVI, ADMINISTRATIVE ANALYST, BUREAU OF THE BUDGET

Mr. LAWTON. Reorganization Plan No. 1 is designed to improve the organization and administration of the Treasury Department. It is one of a series of six reorganization plans designed to effectuate the most basic recommendations of the Commission on Organization of the Executive Branch of the Government with respect to the administration of the executive departments. Every reorganization made by the plan is identical with reorganizations contained in plans Nos. 2 to 6, relating to the Departments of Justice, Interior, Agriculture,

Commerce, and Labor. Last year substantially the same changes were made for the Department of State by act of Congress and for the Post Office Department by Reorganization Plan No. 3 of 1949. This plan, therefore, does for the Treasury Department what the Commission on Organization of the Executive Branch has recommended for all executive departments and what the Congress has already approved for two of them.

In summary, Reorganization Plan No. 1 does four things. First, it transfers to the Secretary of the Treasury all functions now vested in other officers, agencies, or employees of the Department of the Treasury, exclusive of hearing examiners. In the second place, it authorizes the Secretary to delegate his functions to officers, agencies, and employees of the Department. Third, it creates the office of Administrative Assistant Secretary of the Treasury, such official to be appointed by the Secretary with the approval of the President, under the classified civil service. Finally, the reorganization plan includes the usual provisions, required by section 4 of the Reorganization Act of 1949, permitting the Secretary to make such transfers of personnel, property, records, and funds as may be necessary to carry out the provisions of the plan.

The purposes of this plan are to establish clear lines of authority and accountability within the Department, to enable the Secretary to make improvements in its internal organization, and to provide more adequate staff aids to assist him in the management of the affairs of the Department.

At the very beginning of its reports the Commission on Organization of the Executive Branch stated:

The President, and under him his chief lieutenants, the department heads, must must be held responsible and accountable to the people and the Congress for the conduct of the executive branch. * * * Definite authority at the top, a clear line of authority from top to bottom, and adequate staff aids to the exercise of authority do not exist. Authority is diffused, lines of authority are confused, staff services are insufficient. Consequently, responsibility and accountability are impaired. To remedy this situation is the first and essential step in the search for efficiency and economy in the executive branch of the Federal Government.

Reorganization Plans Nos. 1 to 6 are specifically designed to correct these fundamental defects in the administration of the executive departments.

These six reoganization plans are designed to carry out four of the principal recommendations of the Commission on Organization of the Executive Branch for improving departmental management, which were presented in its first and most basic report, namely:

Recommendation No. 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.

Recommendation No. 16: Department heads must have adequate staff assistance if they are to achieve efficiency and economy in departmental operations. Recommendation No. 18: Each department head should receive from the Congress administrative authority to organize his department and to place him in control of its administration. * * *

In addition there should generally be an Administrative Assistant Secretary who might be appointed solely for administrative duties of a housekeeping and management nature and who would give continuity in top management.

Recommendation No. 20: We recommend that the department head should be given authority to determine the organization within his department.

The Commission made the following observation in connection with these recommendations:

The line of authority from the department heads through subordinates is often abridged by independent authorities granted its bureau or division heads, sometimes through congressional act or stipulations in appropriations. Department heads, in many instances, do not have authority commensurate with their responsibilities. Such bureau autonomy undermines the authority of both the President and the department head. There is, therefore, a lack of departmental integration in performing the department's major mission.

Not only does this Reorganization Plan No. 1 directly carry out these recommendations of the Commission, but it makes possible the effectuation of several others by administrative action of the Secretary. I know of no step that will do more to effectuate the recommendations of the Commission on Organization of the Executive Branch and to improve the administrative framework of the Government than the approval of Reorganization Plans Nos. 1 to 6. They lay the foundation for more efficient management of the executive departments.

I have already outlined the views expressed by the Commission on Organization of the Executive Branch of the Government with respect to the subject matter of Reorganization Plans Nos. 1 to 6.

The Commission makes clear in its report on the Treasury Department its intent that its general recommendations relating to the organization of executive departments are applicable to the Treasury Department. The Commission states on page 3 of its report:

In our first report we urged that good departmental administration requires that the Secretary have authority from the Congress to organize and control his organization, and that independent authority should not be granted directly to subordinates.

The functions administered by the principal operating agencies of the Treasury Department are at present preponderantly vested in those agencies, respectively. These agencies are the Bureau of Internal Revenue, the Bureau of Customs, the Bureau of Engraving and Printing, the Bureau of the Comptroller of the Currency, the Bureau of the Mint, the Bureau of Narcotics, the Fiscal Service, the Coast Guard, and the Secret Service. The functions of all these agencies would be transferred to the Secretary of the Treasury by the provisions of Reorganization Plan No. 1 of 1950 and be subject to delegation within the Treasury Department by the Secretary. This is the primary effect of Reorganization Plan No. 1.

This reorganization would give the Secretary of the Treasury the opportunity to review the organization and administration of the entire Department and to make such changes therein as he may deem necessary and desirable in the interest of the effective and economical conduct of the affairs of the Department. It is not required that the Secretary make any specific change in organizational arrangements now existing in the Department, since he is empowered to delegate the functions vested in him by the reorganization plan in such manner as to preserve existing arrangements. It would be expected that changes would be made only if they would accomplish improved administration. The statement appearing in the Congressional Record in connection with the resolution of disapproval relating to Reorganization Plan No. 1 of 1950 indicates that the objections to the reorganization plan relate to its effect upon the Office of the Comptroller of the Currency. I shall therefore direct my remarks to the impact of the plan upon that particular agency.

The functions of the Comptroller of the Currency relate primarily to national banks. These functions have to do with the organization of new national banks, the establishment of branch banks, bank consolidations and reorganizations, the examination of banks, and the administration through receivers of banks which have failed. The Comptroller may in case of deliberate violation of the National Bank Act bring suit against the bank concerned for the forfeiture of its charter; he may appoint a receiver for any national bank he deems to be insolvent (the Federal Deposit Insurance Corporation is required to be appointed as such receiver in the case of a closed insured national bank (12 U. S. C. 264 (L) (3)); he submits a report direct to the Congress annually; and he is ex officio, a member of the Board of Directors of the Federal Deposit Insurance Corporation.

The functions of regulation of national banks, to which I have referred, are vested directly in the Comptroller of the Currency. However, the Office of the Comptroller of the Currency, as a Bureau in the Treasury Department, is within the scope of various statutory authorities of the Secretary of the Treasury. Section 1 of title 12 of the United States Code provides that the Comptroller "shall perform his duties under the general directions of the Secretary of the Treasury." Section 161 of the Revised Statutes, authorizes the Secretary of the Treasury to prescribe regulations not inconsistent with law, for the government of his department, the conduct of its officers and clerks, the distribution and performance of its business, et cetera. The legal work relating to the Office of the Comptroller of the Currency is under the General Counsel of the Treasury Department.

Finally, the appointment of the personnel of the Office of the Comptroller of the Currency, together with functions relating to the fixing of their compensation and their transfer, promotion, demotion, suspension, or dismissal, is vested in the Secretary of the Treasury (Reorganization Plan No. II, made effective July 1, 1939, by act of June 7, 1939, 53 Stat. 813).

In view of the authority of the Secretary of the Treasury, as I have outlined it, much of which authority has existed for over 80 years, I do not feel that the effect of the plan upon the affairs of the Comptroller of the Currency is as drastic as has been suggested.

It has been contended, with respect to the funds collected by the Office of the Comptroller of the Currency in connection with examination of banks, that the Secretary of the Treasury could appropriate and use any unused portion of those collections to carry out other functions of the Department of the Treasury. There is no merit in this point. The Reorganization Act of 1949 contemplates that funds available for transferred functions may be available for such functions after the transfer but not for other functions. Moreover, the laws relating to the Comptroller of the Currency remain in force except as modified by the reorganization plan. There is no provision in Reorganization Plan No. 1 modifying the pertinent laws in such a way as to divert funds collected from the national banks to uses not now provided for by law.

I am aware that the committee has received a letter from the Secretary of the Treasury stating his view that it would be unwise to disturb in any way the functions of the Comptroller of the Currency. In attempting to develop a number of reorganization plans which would apply the Hoover Commission recommendations on general


management of the Government, the President was faced with the question of whether or not to provide exemptions or to apply the recommendations of the Commission on an across-the-board basis through the executive branch. Generally, he took the approach that it would be better to forward reorganization plans to the Congress which did not contain such exemptions.

This is particularly true because the taking effect of the plan does not in itself necessarily alter the administrative arrangements. As I have stated before, the plan does not compel action by a Secretary; it only increases the opportunity for a Secretary to take actions which would affect the organization and administration of his department. It is therefore within the judgment of the department head to determine whether such action should be taken.

In cases where objections have been voiced to a reorganization plan which would make possible some adjustment in organizational relationships, the point has been made that the objections are not in any sense intended to be critical of the individuals currently occupying positions of responsibility. The question is sometimes raised, however, as to whether the future incumbents of such positions would have a similar regard for the proper administration of the subject activities so that it would be safe to grant to a department head administrative flexibility under which he might take action that would disturb the existing organization.

It was a principal thesis of the Hoover Commission, with which the President has several times indicated his agreement, that such discretion should be granted to the department heads and that the normal political checks of appointment by the President, confirmation by the Senate, annual review of appropriation action, and continual authority of the Congress to investigate, should be relied upon to provide proper administrative action.

This is essentially a matter of organizational philosophy on which there can be differences of opinion and which should be treated on a broad basis. The organization principle involved in plans 1 to 6 was, as I have stated, the considered judgment of the Commission on Organization of the Executive Branch of the Government, and was repeated not only in their volume on general management but also in their reports dealing with the individual departments. It was called the first essential step for achieving efficient and economical government within the executive branch.

The fact that there are differences of opinion on this action does not in my judgment detract from its validity nor does it indicate the variances with respect to the particular point of what use would be made of the authority granted. Thus, while I might well agree that the functions of the Comptroller of the Currency should remain by order of the Secretary vested in the Comptroller, I feel that the line of responsibility running from the President to the Secretary of the Treasury to the Comptroller of the Currency should be clearly drawn as provided in the plan.

Reorganization Plan No. 1 was presented to the Congress as a part of a systematic and uniform approach to the management of the affairs of six major departments of the Government. The plan is based upon the desirability of (1) facilitating improved departmental management, (2) eliminating independent authorities heretofore granted bureaus of the Department, (3) establishing clear lines of authority

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