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and accountability within the Department of the Treasury, and (4) enabling the Secretary of the Treasury to make necessary adjustments in the internal organization of the Department.
The CHAIRMAN. Thank you, Mr. Lawton.
I notice you point out that there should be no exceptions with reference to all agencies under the Treasury Department, that none should be excluded. On the first page of your statement you do make
. reference to the exclusion of the hearing examiners.
Mr. LAWTON. They were excluded uniformly because of the quasijudicial function that they perform.
The CHAIRMAN. Yes. I just noted that exception.
Mr. Lawton, the letter from the Secretary of the Treasury underlines one very important feature of this whole matter. I will read it. He said:
It is 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. Then he goes on to say:
The preservation of this system is more important than creating a new channel of authority where no need therefor appears. That is quite a definite statement. While you do say and include as part of your statement that you agree, "Thus, while I might well agree that the functions of the Comptroller of the Currency should remain by order of the Secretary vested in a Comptroller," you then go on to say that the line of responsibility running from the President should be clearly drawn.
Do you think that it would be possible under the future Secretary of the Treasury who might have other opinions than the present one that action could be taken curtailing the functions or reducing the authority of the Comptroller of the Currency if this reorganization plan is adopted?
Mr. LAWTON. The Secretary of the Treasury could have any of the functions which are stated and set forth in law performed by an officer or officers of the Treasury Department other than the Comptroller of the Currency if he so chose, under the provisions of this plan.
Senator O'CONOR. So if the reorganization plan is adopted, the Secretary could take very definite and immediate action which would curtail the responsibility and authority of the Comptroller of the Currency.
Mr. LAWTON. That of course is possible, though apparently the Secretary does not intend to take any such action.
Senator O'CONOR. I well realize that, because he goes on record very definitely about it, but I was speaking of the possibility in the future, and you do think that would be possible.
Mr. LAWTON. Yes, Senator. It is possible with respect to any of the bureaus in the Treasury Department under this plan.
Senator O'Conor. I quite agree with you, if I may say so, with regard to the utilization of funds. It never occurred to me there was any risk or danger of the utilization of the funds for other purposes.
Mr. LAWTON. I think the Reorganization Act protects against that. Senator O'Conor. I think you are absolutely right in that regard.
Senator BENTON. I have a question, Mr. Chairman.
Without checking into it, just on my general recollection, I think as I look back over the decades, the banks have tended as a group to oppose most progressive legislation. I wonder the extent to which this opposition here is emotional. I did not know and would not have guessed from listening to Senator Robertson that the United States Code provides that the Comptroller "shall perform his duties under the general direction of the Secretary of the Treasury.” Listening to Senator Robertson quote the banks, I would not have assumed that that was a part of the present law. I wonder, Mr. Lawton, to what extent does the Secretary of the Treasury now have the authority, if he wished to exercise it, over policies of the Comptroller of the kind that Senator Robertson and Senator Capehart seem to fear.
Mr. LAWTON. There are a number of functions of the Comptroller which the Comptroller performs directly himself and over which the Secretary of the Treasury could not exercise any directive control. Certain general policies could not be inconsistent with any law which specifically directed the Comptroller of the Currency or designated him to do any particular action. It is a mixture.
It is a mixture. The Attorney General in an opinion, 29 Opinions Attorney General 562, dated November 9, 1912, said:
It is true that while the Comptroller is performing quasi-judicial functions his discretion cannot be controlled by you (Butterworth v. Hoe, 112 U. S. 50), yet this is not so of all his duties, otherwise the provision in the statute that he perform his duties under the general direction of the Secretary would amount to nothing. Certainly, broad general lines of policy may be laid down by you to be followed by the Comptroller.
The situation actually is somewhat confused between the specific authorities and the general statement in title 12 U. S. C. 1. It is for that reason that the Hoover Commission said that authority was confused and diffused throughout the departments, and by reason of possibilities of conflicting statutory interpretation.
Senator BENTON. I thoroughly subscribe, of course, to the objective of the Hoover Commission as you set it forth, that the lines of responsibility. should be clearly drawn. I gather, then, that you feel in drawing these lines more sharply there is in fact a great enlargement of power and authority over the Comptroller by the Secretary of the Treasury.
Mr. LAWTON. Yes, I do.
Senator SCHOEPPEL. Mr. Lawton, you have given quite a bit of thought and study to this. I notice on page 6 you say:
It is not required that the Secretary make any specific change in organization arrangements now existing in the Department, since he is empowered to delegate the functions vested in him by the reorganization planand so forth.
Where in your judgment have glaring weaknesses developed in the present set-up?
Mr. LAWTON. I haven't found any particular glaring weaknesses. If we had, perhaps we would have dealt with them specifically by reorganization proposals covering those particular agencies. The reorganization plan is not aimed at any specific bureau of the Treasury
Department. It is aimed at the general principle that better management of the executive branch can be advanced by giving the Secretary the opportunity to continuously and carefully review the organization and operation of his Department, and where he finds weaknesses, to take corrective action.
Senator SCHOEPPEL. All right. Now may I ask you this further question: If no glaring weaknesses have developed, where has the general public suffered up to now under the present handling of this situation?
Mr. LAWTON. I know of no place where it has suffered at the present time by the handling of the situation.
Senator SCHOEPPEL. That is all.
The CHAIRMAN. Mr. Lawton, if the power is not intended to be used, if under the present operation of the law and the present set-up no weaknesses have developed that need to be corrected, if there is no complaint and no necessity for making a change, why do you ask for authority to do it?
Mr. Lawton. Because we felt that the best form of organization for the Government would be advanced if the recommendations of the eminent men who made up the Hoover Commission were followed. We believe that the authority proposed to be placed in the Secretary will give the opportunity to correct any situations that may develop in the future.
The CHAIRMAN. From your long experience in Government-and I must say the chairman and, I am sure, every member of this committee has a high regard for your competency and your efficiency–if you agree, and I will ask you if you agree with the Secretary of the Treasury that no change should be made in the present set-up and operation, then will any harm result if the Congress disapproves the plan?
Mr. LAWTON. It will remove from the Secretary the opportunity to make any changes which a study of his Department might seem to make desirable, or it will eliminate the possibility of the Secretary's taking corrective action in the whole scope and breadth of his Department. That does not affect the Comptroller alone. It affects six or eight bureaus of the Treasury Department. The CHAIRMAN. I understand.
Mr. LAWTON. There may be one organization or two organizations that need some corrective action; there may be three or four that do not. If you disapprove this plan, you eliminate any opportunity to take that corrective action by the Secretary.
The CHAIRMAN. Of course, another plan could be submitted for the Comptroller, if that seems to be the principal objection to the plan, but you used the word "remove" from the Secretary the power. The rejection of this plan would not be removing from the Secretary
Mr. Lawton. No, that is right. It is a mistake to use "remove." The plan grants additional authority.
The CHAIRMAN. The plan is seeking to delegate what we might term unprecedented power with respect to the Comptroller of the Currency, power which the Secretary does not now have. In other words, the plan actually amounts to a delegation of power, and not to the removing of existing power. Is that not correct?
Mr. LAWTON. The plan delegates the same powers that the Congress gave the Secretary of State by legislation and the Postmaster General by reorganization plan.
The CHAIRMAN. Of course, in theory that is generally correct, but I think the Hoover Commission recognized that in many instances in each agency there would have to be a different organization to fit the particular needs and responsibilities of that agency and department. You could not lay down just a blanket pattern for all of them. In theory and in general practice, its line of authority I think is advisable, except where it is determined by the Congress that an agency or a responsibility should be placed in an independent agency to act in its judgment and its decision independent of any higher authority. That is the position the Comptroller of the Currency occupies now. Is that not correct?
Mr. LAWTON. He has an independent position with respect to many functions.
The CHAIRMAN. This plan would remove that independent position and make his decisions as Comptroller of the Currency subject to review and reversal by the Secretary of the Treasury, would it not?
Mr. LAWTON. It would depend on the extent of the Secretary's delegation to him. The reorganization plan would give the Secretary that power, yes.
The CHAIRMAN. Yes. Whatever delegation the Secretary made would by the same power and authority be withdrawn at any time that the Comptroller's action did not please him.
Mr. LAWTON. I mean it is not mandatory under this plan that there should be a review of every action. I did not want that impression to exist.
The CHAIRMAN. That is true, but I am saying he would have the right to review and the right to reverse any action that the Comptroller might take in matters where he now acts independently of the Secretary of the Treasury.
Mr. LAWTON. We did not go quite as far as the Hoover Commission did with respect to the Treasury Department.
The CHAIRMAN. I was just trying to get an analysis of what is really involved here, and what powers are being conferred, and how they could possibly operate differently from the present independent set-up.
Mr. LAWTON. If you recall the Commission's report, it repeated its general recommendation with respect to the Treasury, made no exceptions, and in its organizational chart for the Treasury it listed the Comptroller of the Currency in a group dealing with banking and international finance.
The CHAIRMAN. Are there any further questions?
The CHAIRMAN. We have one other witness scheduled for this morning, Mr. Brumbaugh. Is he present?
Mr. Brumbaugh, will you give your name to the reporter and give your background and experience and state what organization or group you represent or if you are testifying for yourself.
STATEMENT OF D. EMMERT BRUMBAUGH, CHAIRMAN, LEGIS
LATIVE COMMITTEE, NATIONAL ASSOCIATION OF SUPERVISORS OF STATE BANKS; SECRETARY OF BANKING, STATE OF PENNSYLVANIA, HARRISBURG, PA.
Mr. BRUMBAUGH. Senator McClellan and members of the committee, I am here representing the National Association of Supervisors of State Banks as chairman of its legislative committee. I am a former Member of the House and served in the Banking and Currency Committee.
First, I want to say that our organization and the Comptroller of the Currency have worked harmoniously ever since I have been superintendent of banks in the State of Pennsylvania. It is our belief that we have encouraged sound banking in the United States, which I think is the main objective of both our organizations.
I have a written statement here which I would like to present to you.
The National Association of Supervisors of State Banks has steadfastly opposed every proposal placed before the Congress which may harm or weaken the dual banking system. It is essential to the preservation of a strong dual banking system and the preservation of private banking enterprise that the American concept of proper checks and balances be protected in the bank supervisory field. It is, therefore, the firm opinion of our association that all three Federal banking agencies, i. e., the Federal Deposit Insurance Corporation, Federal Reserve Board, and the Office of the Comptroller of the Currency must be kept efficient, free of politics, and independent.
The dual banking system in America came into existence with the establishment of the Comptroller's Office under the National Bank Act 86 years ago. It has achieved unparalleled success through the private operation of State and national banks operating side by side under the cooperative supervision of the Comptroller of the Currency and the respective State bank supervisors. Such an outstanding record of achievement has given great prestige to the Comptroller's Office and our private banking system has the greatest confidence and respect in the integrity, efficiency and sound operation of the national banking system under the Comptroller of the Currency. I am sure that the members of this esteemed committee would not want in any way to jeopardize this splendid situation.
The Comptroller is appointed by the President with the consent and advice of the Senate. He is accountable directly to the Congress through annual reports and he makes recommendations to Congress concerning legislation affecting national banks. The Comptroller's office is entirely self-sustaining, dependent in no way upon appropriations made by Congress or funds supplied by the Treasury Department. The expenses of the office are defrayed by the assessment on national banks. Reorganization Plan No. 1 would, therefore, effect no savings to the Government and it offers only the danger of impairing the efficiency of the Comptroller's office, damaging its prestige, weakening supervision of the national banking system, destroying the effectiveness of our dual banking system and making possible the complete abolition of the Comptroller's office.