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5. Will the national bank examiners become political appointees? In connection with these questions may I make it clear that we in the national banking system have only the highest regard for and confidence in the present Secretary of the Treasury, the Honorable John W. Snyder. However, we are looking ahead to the time when another Secretary might use these powers for purposes detrimental to the soundness of our national banking system. So, because of the contemplated transfer of functions and possible reshuffing of duties, we are deeply concerned with the uncertainties which the future might present. The continuance of a sound and successful national banking system might well be at stake.

Since the creation of the Office of the Comptroller of the Currency, the national banks have looked to the Comptroller for character in leadership. All who have held this office have fought strenuously for & sound national banking system and from time to time have made constructive recommendations to Congress for the purpose of strengthening it. This has been done without fear of censure and without the influence of superiors. Reorganization Plan No. 1 would end this. No longer would there be one individual, whose sole responsibility would be the maintenance of a sound national banking system.

As you already have been informed, all the expenses of the Office of the Comptroller are paid by the examination fees and similar charges assessed against national banks. The Congress neither directly nor indirectly appropriates any funds for maintenance of the Office of the Comptroller. Therefore, no economy accrues to the Government by the proposed Reorganization Plan.

The national-bank division is on record, by resolution adopted by the division as a whole, as opposed to any change in the independent status of the Comptroller of the Currency. Rather than have this independence of the Comptroller de. stroyed by the transfer of all of his functions as proposed in Reorganization Plan No. 1, the national banks of this country would prefer to see the Office of the Comptroller removed completely from the Treasury Department and established as an entirely separate agency.

On behalf of the national-bank division of the American Bankers Association, I urge the disapproval of Reorganization Plan No. 1 of 1950.

The CHAIRMAN. Mr. Bennett?

STATEMENT OF CLAUDE E. BENNETT, PRESIDENT, STATE BANK

DIVISION, AMERICAN BANKERS ASSOCIATION; PRESIDENT, TIOGA COUNTY SAVINGS & TRUST CO., WELLSBORO, PA.. Mr. BENNETT. Mr. Chairman, my name is Claude E: Bennett. I am the president of the Tioga County Savings & Trust Co. of Wellsboro, Pa. I am also the president of the State-bank division of the American Bankers Association.

Mr. Chairman, in order to comply with your request to conserve time, I would like the privilege of filing my prepared statement.

The CHAIRMAN. That may be filed and printed in the record. Mr. BENNETT. Mr. Chairman, I would also like, as a banker from Pennsylvania, to file for the record a statement from the Pennsylvania Bankers Association on this question.

The CHAIRMAN. That may be filed and also printed in the record. Mr. BENNETT. Thank you very much for your courtesy. (The statements referred to follow:)

STATEMENT OF CLAUDE E. BENNETT, PRESIDENT OF THE STATE BANK DIVISION

OF THE AMERICAN BANKERS ASSOCIATION My name is Claude E. Bennett. I am president of the Tioga County Savings & Trust Co., Wellsboro, Pa. It is my privilege to be here today to testify on behalf of the State bank' division of the American Bankers Association, of which I am the President.

Our division of State banks, numbering 9,550 of the total 14,431 banks in the United States is opposed to Reorganization Plan No. 1 as it affects the

Comptroller of the Currency because it endangers our American dual system of banking.

As you gentlemen know, it was judicially determined years ago that both Federal and State Governments had the right to charter and supervise banks as they see fit. Congress has always defended the rights of the States to do this. It is well known that State-chartered banks are competitors of National banks, but regardless of this situation, which is in the public interest, the State bank division of the American Bankers Association supports the independence of the Comptroller of the Currency.

Under this dual system banks can determine whether they desire to operate under a State or National bank charter. These decisions usually are predicated upon the nature of State or Federal legislation, local conditions and taxes.

The dual system of banking has resulted in producing in this country a more virile type of competitive banking, higher standards of banking, and more alert and constructive bank supervision.

In all this, the Comptroller of the Currency has always played an indispensable role. His constructive influence serves to stabilize the procedures, policies and practices of all the various supervisory bodies of State and National banks. Because he administers the national-bank laws applying to national banks in every State, there is no question but that his influence is greatly responsible for the establishment of sound banking principles throughout the Nation. On the other hand, the operation of the dual banking system is such that there is no danger of his gaining sufficient power to permit him to dominate all the banks of this country. • The reorganization plan would place in the hands of the Secretary of the Treasury, in addition to his control of the Government's fiscal policies, jurisdiction over all national banks, and he would also have the power to make or influence the decisions of the Comptroller, who is by law a Director of the Federal Deposit Insurance Corporation. This combination of authority would bring within his sphere of influence over 91 percent of the banks of the country—that is, 13,436 national banks and insured State banks. This would be a very serious blow to our dual banking system because supervisors of State banks would be virtually stripped of their authority through the vast power so vested in the Secretary.

The State bank division of the American Bankers Association believes in the preservation of the dual system of banking. We believe in the enterprise system and oppose any plan that would tend to concentrate power over all the banks of this country in one central authority. This would lead to the ultimate nation. alization of banking.

The State bank division of the American Bankers Association is opposed to the President's Reorganization Plan No. 1 of 1950 and recommend that it be disapproved.

STATEMENT OF POLICY OF THE PENNSYLVANIA BANKERS ASSOCIATION The Pennsylvania Bankers Association is vitally concerned with the implications which are inherent in a section of Reorganization Plan No. 1 as presented to the Senate by the President under date of March 13, 1950, with particular reference to a situation of grave importance to the national banks of this country, as well as to banking generally, by the placing of the duties and powers of the Comptroller of the Currency in the hands of the Secretary of the Treasury.

It is an established fact that the office of the Comptroller of the Currency has, for the past 86 years, maintained an enjoyed an independent status singularly free of political influences in its supervision of the condition of our national banks and has contributed to the country's sound economy during many critical periods, thereby achieving a record of which all bankers may be justifiably proud.

The original provisions of the National Bank Act very wisely designated the term of office to which the Comptroller should be appointed at 5 years in order that such appointments would not parallel Presidential election terms, thus keeping the Comptroller's Office free of political entanglements. During its entire history the record of the Comptroller's Office has been an outstanding example of the absence of political participation and no changes should be inaugurated which would cause the office to deviate from its long and enviable record of performance.

The principal objectives of the passage of the reorganization plan are listed as (a) economy of operation and (b) elimination of overlapping functions, but neither of these goals would be achieved by assigning the Comptroller's duties to the Treasury since the Comptroller's Office receives no appropriation from Congress and costs the taxpayer nothing. Its revenue is derived from fees covering the

examinations of our national banks; its examiners reports are accepted by the FDIC and the Federal Reserve Board; therefore, no overlapping of its functions would be eliminated.

The Comptroller of the Currency is appointed by the President with the consent of the Senate and he is accountable to Congress through the presentation of annual reports; he is charged with the responsibility of making recommendations to Congress affecting our national banking system; he serves as one of the three directors of the FDIC. Among the Comptroller's powers which would pass to the Treasury are the following: Chartering of national banks; approval of branch offices; approval of consolidations and/or conversions of State banks with national banks; and power to determine solvency and appoint receivers. · State-chartered banks are the natural competitors of national banks and it is of unusual significance that representatives of the State Bank Division of the American Bankers Association, comprising almost two-thirds of its membership, have testified in favor of the exemption of the Comptroller's Office from the reorganization plan since it is believed that the abolishment of the office would constitute & definite threat to our dual system of banking, & system which has provided our economy with a vehicle by means of which we have enjoyed greater industrial achievement than any other nation with the result that we occupy a position of dominance and progress that is envied by all the world. : The national banks of the country view the Comptroller's Office as an independent sponsor of sound banking and the high prestige it has enjoyed for the past 86 years is conclusive proof of its demonstrated value to the Nation.

It is for these reasons that the Pennsylvania Bankers Association by appropriate action taken by its executive committee is opposed to the passage of any legislation which would destroy the independent status of the Office of the Comptroller of the Currency, inasmuch as such a change would be inimical to the best interests of our member banks and the association desires to place itself upon record as favoring the exemption of the Comptroller's Office from the provisions of Reorganization Plan No. 1 of 1950.

The CHAIRMAN. Any questions?
Senator LEAHY. I have one question, Mr. Chairman.

Were the bankers given the opportunity to be heard on this plan before it was presented?

Mr. BENNETT. You mean the State bankers?
Senator LEAHY. Yes.

Mr. BENNETT. Senator, the State-bank division has an executive committee comprised of about 14 members. These members are located from Minnesota to Texas and from Connecticut to California, covering the entire United States. When this question arose I wired every member of the executive committee asking for their concurrence in this stand, and I have here 13 telegrams without a single exception all agreeing to this stand.

Senator LEAHY. I think you misunderstood my question. It was this: Before the plan was developed and formulated and presented to the Congress, were the bankers given an opportunity to be heard on this question?

Mr. BENNETT. You mean by way of a poll? · Senator LEAHY. No, in any hearings.

The CHAIRMAN. He means did those who formulated the plan, anybody in the Treasury, the Bureau of the Budget or anyone else up here consult or confer with the bankers about the plan prior to the time it was submitted?

Mr. BENNETT. Not to my knowledge.
The CHAIRMAN. When did you first have notice of such a plan?
Mr. BENNETT. As it affects the Comptroller's office?

The CHAIRMAN. Yes.
Mr. BENNETT. Last month.

The CHAIRMAN. At the time or after the plan was submitted to the Congress?

Mr. BENNETT. After. . · The CHAIRMAN. We might ask that same question of others of the national banks.

Thank you very much.
Mr. BENNETT. All right, sir. Thank you.
The CHAIRMAN. We might ask that question of Mr. Gladney. .
What would you say to that?

Mr. GLADNEY. This is the first opportunity we have had to testify on this, Senator.

The CHAIRMAN. Were you consulted in any way by the executive branch prior to the time the plan was submitted in order to ascertain the views of the banking fraternity?

Mr. GLADNEY. No, sir; I was not. Mr. Fleming might answer that also.

Mr. FLEMING. I might say the first I knew of the Reorganization Plan No. 1 as it was presented to the Congress was after it had been submitted to your committee, sir, by the Bureau of the Budget. When I mentioned my talk with Mr. Pace, the Director of the Budget, that was subsequent to its submission · Senator LEAHY. Were you given any opportunity to present your views to the Hoover Commission?

Mr. FLEMING. No, sir. It is my understanding, Senator, that the staff-level report was drawn-I forget the gentleman's name, who was a professor from Harvard. He came down and he had the task of examining the three banking agencies. My understanding is that he spent very little time in the Comptroller's office. There was no consultation with any of us who might be known to have some leadership in banking. There was no discussion at all of that sort.

The CHAIRMAN. Mr. Cooley?

STATEMENT OF H, H. COOLEY, CHAIRMAN, COMMITTEE ON

FEDERAL LEGISLATION, VIRGINIA BANKERS ASSOCIATION; VICE PRESIDENT AND CASHIER, ROUND HILL NATIONAL BANK, ROUND HILL, VA.

Mr. COOLEY. Mr. Chairman and gentlemen, I would like to present my paper, if you don't mind. It will not take more than 5 minutes. · The CHAIRMAN. That will be all right.

Mr. COOLEY. It is a little different line of thought from anything you have had presented.

The CHAIRMAN. You may proceed as you wish. Mr. COOLEY. My name is H. H. Cooley, and it is my privilege to appear before this committee as the chairman of the Federal legislative committee of the Virginia Bankers Association. I am appearing at the request of the Virginia Bankers Association.

I live in Round Hill, Va., which is one of many small towns in our Commonwealth. I am the vice president and cashier of the only bank in the town, the Round Hill National Bank, with resources of over two million dollars. I have served as an officer in a national bank for more than 30 years and feel that I am able from my own personal experience to tell you of the importance of the Office of the Comptroller of the Currency to the small national banks.

You can readily appreciate that our personnel is very limited in number, totaling only six. Most of us in the bank have to perform

many functions. Fortunately for the small banks, the examiners of the Comptroller's office give us much valuable assistance. They frankly discuss with us such matters as the reasonable relationship which should exist between loans, deposits, and capital, as clearly emphasized in the Comptroller's last annual report, the need for adequate reserves for losses, various short-cuts in operations, and the proper manner of handling various types of loans and investments. You might say the Comptroller's office helps us serve the public better.

The problem that is bothering our bank and other small national banks is whether or not the proposed reorganization plan is going to disrupt our valuable relationship with these examiners and with the Office of the Comptroller itself. Transferring the functions of the Comptroller to the Secretary of the Treasury might result in the small national banks being lost in the shuffle and confusion.

As you know, in the Commonwealth of Virginia we are strong advocates of the dual banking system, and the right it carries with it to determine whether we should operate under a State or a Federal charter. In our Commonwealth there are 131 national banks and 182 State banks, giving us more national banks, as compared with State banks, than the national average.

However, should the confusion of this reorganization plan disturb our operations, and make it difficult for us to obtain the same character of service from the Treasury Department as from the Comptroller's office, a State charter might seem desirable. History discloses that there have been shifts from State to National bank charters and the reverse, depending upon, among other things, the nature and character of bank supervision. That is why we are glad of States' rights and our dual system of banking.

On behalf of the Virginia Bankers Association, I want to enter a protest against the Reorganization Plan No. 1. We want no part of what might change a happy and satisfactory arrangement, particularly when the proposed change cannot conceivably produce any good results. We do not want to have the duties of the Comptroller divided among various offices within the Treasury, and then to find, at a later date, other offices or agencies have taken over.

We urge you to take such action that the Comptroller's office will continue to be responsible solely for our supervision, as it has since 1863, and we hope as long as this Nation exists.

We recommend the disapproval of Reorganization Plan No. 1 of 1950.

I thank you.
The CHAIRMAN. Thank you, Mr. Cooley.
Are there any questions?
Mr. COOLEY. Thank you, sir.
The CHAIRMAN. Mr. Buesching.

STATEMENT OF CHARLES H. BUESCHING, PAST PRESIDENT OF

THE INDIANA BANKERS ASSOCIATION; PRESIDENT, LINCOLN NATIONAL BANK & TRUST CO., FORT WAYNE, IND. Mr. BUESCHING. Mr. Chairman and honorable gentlemen, my statement is so very short that I would appreciate the privilege of presenting it by reading it.

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