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Washington, D. C.

The committee met, pursuant to recess, at 10 a. m., in room 357, Senate Office Building, Senator John L. McClellan (chairman of the committee) presiding.

Present: Senators McClellan, Leahy, Benton, Mundt, and Schoeppel.

The CHAIRMAN. The committee will come to order.

We will resume hearings this morning on Senate Resolutions 246 and 247, the purpose of both of which is to disapprove Reorganization Plan No. 1.

I see we have nine witnesses scheduled for this morning. It may crowd us a little to get through by noon, so I am going to ask the witnesses to be as brief as they can. I do not want them to fail to cover their points that they have in mind, but we would like to expedite this and conclude it by noon today.

The first witness is Mr. Cocke. Will you come around, please. Do you have a prepared statement?

Mr. COCKE. Yes, sir. It is quite brief.

The CHAIRMAN. Do you prefer to read it?
Mr. COCKE. I would like to read it, sir.
The CHAIRMAN. You may proceed.


Mr. COCKE. Mr. Chairman and gentlemen of the committee, my name is C. Francis Cocke. I am president of the First National Exchange Bank of Roanoke, at Roanoke, Va. I am also chairman of the Committee on Federal Legislation of the American Bankers Association. It is my privilege to be the first of several witnesses to speak for the association in opposition to Reorganization Plan No. 1 of 1950.

The American Bankers Association represents over 97 percent of all the banks in this country and over 99 percent of the Nation's banking resources. As of December 31, 1949, the national banks of this country represented over 35 percent of all commercial banks and held about 57 percent of their total assets. At that time national banks held over $38,000,000,000 of governmental obligations, which


constituted 57 percent of all governmental obligations owned by all commercial banks. Because the President's Reorganization Plan No. 1 of 1950 provides for reorganizations in the Department of the Treasury, and because the Office of the Comptroller of the Currency would be affected primarily, national banks, and in fact all banks, are deeply concerned with the plan and for the reasons hereinafter stated urge the Senate to take the necessary action to disapprove it.

The effect of the President's plan would be to transfer the functions of the Comptroller of the Currency to the Secretary of the Treasury and to empower the Secretary to authorize the performance of any function by any other officer, or by any agency or employee of the Treasury Department. The Secretary of the Treasury could also effect the transfers within the Department of any of the records, property, personnel, and funds as he might deem necessary in order to carry out the provisions of the reorganization plan.

Specifically, the plan would involve the transfer to the Secretary of the Treasury of these functions now performed exclusively by the Comptroller:

The Comptroller issues the certificates which authorize national banks to engage in the banking business. Only when authorized to do so by the Comptroller can any national bank change its name or location, operate branches, consolidate with other national or State banks, increase or reduce its capital stock, or issue preferred stock.

The Comptroller prescribes the regulations concerning the investment securities of national banks. He interprets and enforces the laws relating to lending and investment powers. Through not less than three required reports and not less than two examinations during each calendar year the Comptroller closely supervises the operations of national banks. The Comptroller is authorized to compute and collect the assessments for the examinations of national banks and their affiliates.

The Comptroller has the power to appoint a receiver of a national bank if satisfied of its insolvency, the power to appoint a conservator to conserve the assets of any bank for the benefit of depositors and other creditors, the power to levy assessments against shareholders of national banks to restore impairment of capital and the power to initiate proceedings to forfeit the charter of a national bank for violation of the law.

The Comptroller also has been authorized to serve as a Director of the Federal Deposit Insurance Corporation. He is required to make annual reports to Congress on the activities of the national banks of the country.

These powers of the Comptroller are broad and must be judiciously administered. His decisions must be equitable and unbiased and, when made, are final. The provisions in the national banking laws were made for the purpose of protecting the national banks with a leadership independent of undue influence from other governmental authorities and from other sources.

The plan would destroy the semi-independence of the Comptroller of the Currency and sever his direct relationship with the Congress to which body he now is accountable. The plan would deprive the national banks of an independent governmental representative to speak on their behalf. The plan would confuse responsibility and disturb the operations of a highly qualified bureau and open it up to political or other influence.

With your permission I would like to review certain facts, some historical, which support the independent status of the Office of the Comptroller of the Currency and the need for its continuance.

Eighty-seven years ago in 1863 Congress created a separate bureau in the Department of the Treasury charged with the execution of laws relating to the issue and regulation of a national currency. The chief officer of that bureau was to be called the Comptroller of the Currency and was to perform his duties under the general direction of the Secretary of the Treasury. The Comptroller also was given the responsibility of chartering and supervising the banks organized under the national laws.

With the passage of time, one of the original functions of the Comptroller, the execution of all laws relating to the issuance, circulation, and redemption of national bank notes secured by United States bonds has ceased to exist. The original community of interest between the Comptroller, responsible for this function, and the Secretary of the Treasury, charged with the administration of the fiscal policy of the Government, now no longer exists. The severance of this tie adds to the Comptroller's independent status.

The first Comptroller of the Currency recognized the need for the independent status of his office. In 1864 he recommended to Congress the removal of the headquarters of the bureau to New York or Philadelphia in order to separate it entirely from the Department of the Treasury and to free it from political influences. The second Comptroller of the Currency likewise made the same recommendation. In 1912 the Attorney General of the United States counseled President Taft that

* while the Comptroller is performing quasi-judicial functions his discretion cannot be controlled by you

even with respect to other duties he acts

under the general direction of the Secretary of the Treasury.

In the Comptroller's report to Congress in 1923, Henry M. Dawes


The Office of the Comptroller of the Currency is one of the most independent in the Government service. * * * This arrangement was made with the obvious purpose of protecting the national banks with a leadership which would be independent of undue influence from other governmental authority. The Comptroller of the Currency should, in the governmental organization, be the representative and the partisan of the national banks.

The monograph of the Attorney General's Committee on Administrative Procedure in 1940 states:

While the statute contemplates that the Comptroller of the Currency shall exercise his powers under the general direction of the Secretary of the Treasury, the latter has so generally refrained from the exercise of the control contemplated by the statute that, for the purpose of this discussion, the Comptroller's Office may be regarded as an essentially independent agency.

In 1935 the law was changed so as to provide for the appointment of the Comptroller solely by the President, with the advice and consent of the Senate. Before that time the recommendation of the Secretary of the Treasury was required. This was a further recognition by Congress of the independent status of the Comptroller.

The present law also provides that the Comptroller can be removed from office only by the President and only upon reasons communicated by him to the Senate. It also makes the Comptroller directly

accountable to the Congress as he is required to report to it annually. In addition he makes recommendations to the Congress concerning legislation relating to national banks.

The independent status of the Comptroller's office is further emphasized by the fact that it is financially self-supporting. No part of the expenditures of this bureau are paid by appropriations from the Congress.

Congress incorporated two features in the present law to further safeguard the independence of the Comptroller and to prevent political or other pressure from influencing his decisions. Congress provided that the term of office of the Comptroller should be for 5 years, and, therefore, not concurrent with the tenure of office of the Secretary of the Treasury. Congress also provided that in view of the unusual authority, including quasi-judicial powers, in the creation of new banks and branches and the regulation and supervision of the national bank system, the Comptroller be prohibited from accepting any employment with an insured bank for 2 years after he leaves office.

Through law and established custom and practice the Comptroller now enjoys an independent status, which in the best interests of the national economy and the best interests of the depositors, stockholders, and customers of banks should be maintained.

I have endeavored only to sketch briefly the historical background of the Office of the Comptroller and to point out that it always has been the intention of Congress that this bank supervisory agency should enjoy a high degree of autonomy and independence. This independence is evidenced by the legal provisions for the Comptroller's appointment, term of office, removal from office, accountability to Congress, and self-supporting status.

Mr. F. Raymond Peterson, president of the American Bankers Association, is here today and with your permission I should like to introduce him to the committee at this time. He will present to you a very detailed analysis of Reorganization Plan No. 1 and go thoroughly into our reasons for opposing it and asking you to act favorably upon Senate Resolution 246.

I thank you, sir.

The CHAIRMAN. Thank you.

Any questions, Senator Benton?

Senator BENTON. I have a few questions, Mr. Chairman.

I think that is a very interesting statement. I have been glancing over the earlier part which I missed, Mr. Cocke, and I hope you will excuse me for coming in late.

On the first page is something that I think is very natural from the standpoint of the banks, but I would like to call your attention to the phrase that the Comptroller of the Currency would be affected primarily, the word "primarily." I am wondering whether you and your associates weighed the fact that there are nine various bureaus involved, including the Bureau of Internal Revenue, Customs, Narcotics, Mint, Engraving and Printing, Fiscal Services, and so forth; and this is not a reorganization plan which does affect the Comptroller of the Currency primarily. I thought I would point that out, and I wondered the extent to which you have weighed that in preparing your testimony.

Mr. COCKE. I realize, of course, that all of those other bureaus of the Treasury Department were likewise involved. Naturally, sir, the

Comptroller's Office is one that we are primarily interested in, and I used the word "primarily," I think, to emphasize our position, sir.

Senator BENTON. In line with the general objective here of fixing responsibility and getting practices that could be said to be better management practices in government and sounder operating policy which are a matter of executive responsibility, this plan does involve a much larger scope, and I thought that perhaps you had not been fully conscious of that.

The second question that I thought I would like to ask you refers to your statement at the bottom of page 5, and I wondered whether you were aware of what was brought out in the testimony yesterday, that under title 12 of the United States Code you have the Comptroller of the Currency today directed that he shall perform his duties under the general direction of the Secretary of the Treasury, that this is a part also of the law, though it is not a part which you bring out here in your testimony.

Mr. COCKE. Yes, sir; I realize that that statement is in that section of the code, but at the same time there are many other duties by which the Comptroller acts in a judicial position, and he acts independently.

Senator BENTON. However, to give a balanced picture of his role under the law, in view of the fact that you have emphasized one side, I wondered if you were conscious of the fact that there is this statement in the law that he shall perform his duties under the general direction of the Secretary of the Treasury in the present law. Mr. COCKE. Yes, sir; I was fully aware of that.

Senator BENTON. Thank you, Mr. Chairman.

The CHAIRMAN. Senator Schoeppel?

Senator SCHOEPPEL. No questions.

The CHAIRMAN. Thank you very much.

Mr. COCKE. Thank you, sir.

The CHAIRMAN. Mr. Peterson, we will be glad to hear from you.


Mr. PETERSON. My name is F. Raymond Peterson. I am president of the American Bankers Association, chairman of the board of the First National Bank of Paterson, N. J., and a former employee of the Comptroller of the Currency, having been a national bank examiner for approximately 12 years.

The statement I am about to make is the position of the American Bankers Association.

I will read it, sir.

Government Reorganization Plan No. 1 under consideration by this committee is intended to provide for reorganization of the Treasury Department. However, the plan would have two, and only two, significant results. First, it would create a new office within the Treasury, to be called the Office of Administrative Assistant Secretary of the Treasury. Second, the plan would transfer the authority, powers, funds, and functions of the Comptroller of the Currency to the Secretary of the Treasury.

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