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law accountable to the Congress, an agency that has vested in it quasi-judicial powers, and then say we transfer that and all of those functions to the head of a department, I just say frankly I am going to have to look back through these reports. I have an offhand opinion now as to whether we did that or intended that, but I shall want to check further. It seems to me that that is the crux of the
issue here before us now.
Mr. PETERSON. As I remember the Hoover report, the Comptroller of the Currency himself was not included. I might also say that sometimes the cure can be worse than the disease, because the plan could result in nationalization of our national banks and also nationalization of credit. The Treasury could have supervision of the duties and powers and regulation of the examiner.
It could instruct him to go out and examine banks and see that certain classes of paper are eliminated, or that certain types of loans are granted or suggest to the bank that they be granted. Certain pressures could be used. It could be because of political expediency or something of that nature. I am not questioning the present Secretary of the Treasury because we have every confidence in him, but he will not be there always. We do not know what the opinion of some future Secretary of the Treasury may be in the exercise of those powers. So we feel that the present semi-independence of the Comptroller should be maintained. It will be of benefit to the economy of our country.
The CHAIRMAN. The chairman wishes to state that he shares the confidence that most every witness who has testified so far has expressed in the present Secretary of the Treasury, and I am not apprehensive that whoever his successor may be would undertake to exercise in an arbitrary way all of the powers that this plan confers upon the Secretary. I think Secretary Snyder, if this power is granted him, would never in any degree abuse it.
As I say, I would not be too apprehensive that his successor might abuse it. But this is permanent legislation. We are legislating national policy here whereby the Congress is delegating or conferring power that might be used in an arbitrary way.
I think we must
I am trying to keep an open mind in this matter. take into account that this plan is not just to serve throughout the case of the present administration, but it in effect becomes law and is continuing law and, unless changed by another reorganization plan or by act of Congress, the powers would be continuing powers throughout succeeding administrations.
I wish to thank you for your testimony.
Senator Benton, have you any questions?
Senator BENTON. I am interested, Mr. Chairman, in the very important clarifications which I feel you have just contributed. I am wondering whether Mr. Peterson could speculate for a minute on what the incentives would be to some future Secretary of the Treasury to induce him to abuse these powers.
Mr. PETERSON. I think it might be political. We do not know what the future might bring forth. As the Senator said, he would have the powers, if they be permanently given to him, and they might be used some time in the future by someone. our Government in years to come. and power to do it if he so chose.
We do not know the future of Someone would have the right
Senator BENTON. The word "political" covers war and peace and a geat deal of other territory. I wonder if you could be more specific. What is the political motivation, and could you give an illustration of how, in line with that, there would be real incentive to a Secretary of the Treasury to upset all the banks in the country and to upset all the newspapers of the country and to bring down on his head what seemingly would come down on his head if he abused these powers.
Mr. PETERSON. The trend in our country seems to be toward nationalization and more control over credit and the banks. The plan also might affect, too, the dual system of banking because it would remove that yardstick which has been used by State banks and others in their operation.
Senator BENTON. I am wondering why he would want to do this. Why would this future Secretary of the Treasury want to move in aggressively and upset the dual system of banking?
Mr. PETERSON. To obtain control because of some political expediency that might appear necessary at the moment. It is hard to describe now what those different things might be or what problems might exist at that time that would cause him to move in and take control. He might be motivated by the best of intent, thinking that he is moving properly. It would be a decision of a single individual to do as he chose. So it is hard to state what a Secretary of the Treas ury at that time might be thinking of, or would have in mind to do. He would have the privilege and right to use his powers if he so chose to use them.
Senator BENTON. Our responsible political officers have many privileges and rights which they do not exercise, and I am still a little bit vague, in the light of Senator Robertson's testimony yesterday, about the unanimity of the banks here and their importance in our communities and the manifest importance of our dual system of banking, why the Secretary of the Treasury would feel that he had an incentive to come in and corrupt our financial system when he is charged with the responsibility and power of protecting it. The incentive is hard for me to see, whereas, the desirability of efficiency in the management of our Government and efficiency in our administration is very easy for me to see, and we have very, very little of it.
Mr. PETERSON. The Secretary of the Treasury at the present exercises general supervision of the efficiency of the Comptroller's Office. The plan might result in socialization of banks. You know the trend in England is in that direction. If something should happen to us in the future, with this as a permanent law, it might lead to that. Therefore, the banks don't like to have any laws on the books which might come up to haunt them in the future.
Senator BENTON. Your point is that a future Secretary of the Treasury might have, for unknown reasons, an incentive to socialize our banking system.
Mr. PETERSON. That is right.
Senator BENTON. Could I ask one other question, Mr. Chairman? On page 2 you state that "the only bureau of the Treasury which would be affected by this plan is the office of the Comptroller of the Currency."
Why did you make that statement?
Mr. PETERSON. It is my understanding that that is the only independent bureau in the Treasury and it would be affected by plan No. 1.
Senator BENTON. In view of the fact that there are nine major bureaus which are affected, of which the Comptroller of the Currency is only one, in view of the fact that we have the Bureau of Internal Revenue, with which all of us have some familiarity, at least all chairmen and presidents of banks have some familiarity with the Bureau of Internal Revenue; the Bureau of Customs, and there are some bank presidents who have the experience of coming through the customs; the Bureau of Narcotics, the Bureau of the Mint, the Bureau of Engraving and Printing, the Fiscal Service, the United States Secret Service, and of course the United States Coast Guard, which is quite a substantial operation-are you willing to amend your testimony to make it clear that the Bureau of the Comptroller of the Currency is only one part of Reorganization Plan No. 1 and that your testimony therefore bears on that part of Reorganization Plan No. 1 which affects the Comptroller of the Currency?
I make that clarification, Mr. Chairman, because I have received letters from Connecticut from the American Legion asking me to vote against the Hoover Commission reports because of certain objections the American Legion has to one small section dealing with the plans affecting the Veterans' Administration. There are 19 volumes of reports, and I think it is important to clarify our testimony sharply on exactly what the objection is.
I wonder if you will amend your testimony accordingly.
Mr. PETERSON. We are naturally interested only in the banking phase of the plan, and that is what we are bringing out there insofar as the Comptroller's Office is concerned.
Senator BENTON. Your testimony condemns Reorganization Plan No. 1 as if there were nothing in the plan except the appointment of an assistant secretary, and I think it is important for the banking people to recognize there is a great deal more to it than this one facet which has to be decided and exercised, seemingly, with considerable justice. That is all, Mr. Chairman, if Mr. Peterson answered my question. Mr. PETERSON. It is my thinking that our primary thought is for the Comptroller's Office and that is what I was speaking about, not taking into consideration the other bureaus that you have mentioned. Senator BENTON. If you will look at page 2 you will see what your testimony was before.
Mr. PETERSON. I was speaking of the Comptroller because that is our interest.
The CHAIRMAN. Senator Leahy, any questions?
Senator LEAHY. No, sir.
The CHAIRMAN. Thank you very much.
Mr. PETERSON. Thank you, sir.
The CHAIRMAN. Mr. Fleming?
Do you have a prepared statement?
Mr. FLEMING. I have, Mr. Chairman.
The CHAIRMAN. Do you prefer to read it?
Mr. FLEMING. It is rather short, Mr. Chairman. I do not think it will take very long, because other witnesses have gone more at length. There are certain phases that are a slightly different approach, possibly.
The CHAIRMAN. We are not trying to crowd any of you or unduly restrict any of you. You may proceed with your statement.
STATEMENT OF ROBERT V. FLEMING, CHAIRMAN, GOVERNMENT BORROWING COMMITTEE, AMERICAN BANKERS ASSOCIATION; PRESIDENT, RIGGS NATIONAL BANK, WASHINGTON, D. C.
Mr. FLEMING. My statement is very short and I do not think it will take very long.
My name is Robert V. Fleming. I am president and chairman of the board of the Riggs National Bank of Washington, D. C. Having formerly served as chairman of the committee on Federal legislation of the American Bankers Association, and as the president of the association in 1935-36, I have been requested by the association to appear before this committee and present my views in regard to Reorganization Plan No. 1.
In addition, I am appearing here this morning in my own capacity as the president and chairman of the board of my institution. For a period of nearly 30 years, ever since I was elected cashier of the Riggs National Bank in May 1920, I have been in close contact with the Treasury Department and particularly with the Office of the Comptroller of the Currency, due to the physical location of my institution in the Nation's Capital.
Moreover, since the committee on Government borrowing of the American Bankers Association was created in 1942 at the request of Secretary of the Treasury Morgenthau, I have been a member of the committee, and for the past 4 or 5 years have served as its chairman. The committee is advisory to the Secretary of the Treasury. It confers with the Secretary on the types of securities which may be offered by the Treasury to the public, and deals with such matters as sales of savings bonds and other affairs pertinent to the management of the public debt. Because this committee acts entirely in an advisory capacity to the Secretary of the Treasury, it reports only to the Secretary. I mention this fact only in order to indicate my familiarity with matters pertaining to the Treasury Department.
In my appearance here this morning, I desire to be recorded as in opposition to Reorganization Plan No. 1 as it particularly affects the Office of the Comptroller of the Currency. First, let me say it is my understanding that the present Secretary of the Treasury is not in sympathy with Reorganization Plan No. 1 as it would apply to the Office of the Comptroller of the Currency, and has so advised his committee in his letter dated April 7, 1950.
Naturally, where we are faced with a large national budget, I am in favor of measures which would reduce public expenditures wherever it is possible in the public interest to do so. Under Reorganization Plan No. 1, no saving of public funds could be effected with respect to the Office of the Comptroller of the Currency. This office is maintained and its expenses are borne entirely by assessments against the national banks, which the Comptroller supervises and examines.
The Office of the Comptroller of the Currency has served as a bulwark in maintaining the strength of the banking system of this country. Coming under his jurisdiction are approximately 5,000 national banks, representing about 56 percent of the commercial bank resources of the country. With my long experience in dealing with successive Comptrollers of the Currency, I have found that they have invariably safeguarded the national banking system Congress created over 86 years ago. The Comptroller of the Currency is constantly on the alert to
see that fair competitive standards are maintained, in order that the banks may adequately serve the public. Under existing law, the Office reports directly to the Congress and, from time to time, makes legislative recommendations designed to strengthen the national banking system so that with changing economic needs of the country the system can best serve the public interest.
The Comptroller of the Currency is appointed by the President, subject to confirmation by the Senate, for a term of 5 years. This 5-year term of office was deliberately fixed by the Congress in order that the Comptroller's office could be as free as possible from political considerations. The Comptroller's office has quasiindependent status, and although he administers the functions of his office under the general direction of the Secretary of the Treasury, he is accountable to the Congress through his annual reports to the Congress, and enjoys a position of prestige on the same plane as the heads of the other bank supervisory agencies. In the Banking Act of 1935 a significant change in former law was made, in that the Comptroller of the Currency is now appointed directly by the President and not, as formerly, by the President upon the recommendation of the Secretary of the Treasury.
I am very familiar with the reasons for that, Mr. Chairman and gentlemen, as I was on the committee of five of the American Bankers Association and collaborated with Senator Glass and with the then Chairman Eccles of the Federal Reserve Board and the Comptroller of the Currency, Mr. O'Connor, where we worked out a very constructive banking law that has stood the test of the war strain, and the economic strains of the thirties.
In my opinion it is necessary to preserve the strength of the national banking system. Under Reorganization Plan No. 1 the prestige of the Office of the Comptroller of the Currency probably would be lost, no saving to the taxpayers would be effected and, even more important, the historical background of 86 years of training and experience in bank examination made upon the objective basis of the soundness of the banks' assets, could be lost. I believe that the subservient status that the Comptroller's Office might occupy under Reorganization Plan No. 1 would take away all the present strength of the Office. Furthermore, should this plan become law, the Comptroller of the Currency would still be appointed by the President, but the Secretary of the Treasury would be empowered to shift his duties to other officials of the Treasury, and thus emasculate the office.
The bankers of this country have every confidence in the Office of the Comptroller of the Currency. We also have confidence in the present Secretary of the Treasury, the Honorable John W. Snyder. But when we deal with legislative matters we must not look at the problem from the standpoint of personalities presently in office, but from the viewpoint of what could happen in the future, under different conditions, and under the administration of other appointees. This fact emphasizes a peculiar phase of Reorganization Plan No. 1. Officials. would be appointed by the President and confirmed by the Senate, but the Secretary of the Treasury could shift the duties and the responsibilities of their offices to individuals other than those so appointed and confirmed. While certain officials of the Department of the Treasury can be appointed and-again I repeat, be confirmed by the Senate their duties could be so shifted as virtually to eliminate