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The CHAIRMAN. All right, you may proceed. Mr. BUESCHING. My name is Charles H. Buesching. I am president of the Lincoln National Bank & Trust Co. of Fort Wayne, Ind. I am appearing here at the request of the Indiana Bankers Association, of which I am a past president. On behalf of that association, I would like to add its protest to those which have been made this morning against Reorganization Plan No. 1 of 1950.
It is with a special sense of pride that I testify on a matter concerning the Comptroller of the Currency, for the first Comptroller, Hugh McCulloch, began his banking career in 1835 in my home town of Fort Wayne. At first he was opposed to the purposes of the legislation creating the Office of the Comptroller. A trip to Washington, however, convinced him of the need for this legislation. He became a staunch believer in the independent status of the Comptroller. He later became the Secretary of the Treasury.
As a banker, I am inclined to follow my banking training and scrutinize carefully any proposition affecting the interests of the banks of the Nation. I like to know the practical reasons back of any proposed change. Certain realistic questions have bothered me in connection with the proposed reorganization plan.
First, where is the United States Government going to save any of our taxpayers' money? The proposed plan would result in no economy to the Government. The national banks of the country pay all the bills of the Office of the Comptroller. Therefore, there would be no savings to the taxpayers.
Second, what is to be accomplished by the proposed reorganization? If the Secretary of the Treasury only redelegates the functions back to the Comptroller of the Currency, nothing is changed. In that case the plan accomplishes nothing.
If the Secretary does not redelegate the functions back to the Comptroller, will his responsibilities be shifted to other officers, agencies, or employees of the Department even to the extent of abolishing the Office of the Comptroller? Can such changes produce a firm over-all policy conducive to sound banking or are they not more likely to create confusion because of division of responsibilities now entirely centered in one experienced individual, the Comptroller?
At the present time, in my opinion, the Office of the Comptroller is administered in a highly satisfactory manner. No criticism, so far as I can learn, has been directed at its operations.
I can see no valid reason for the reorganization plan from the viewpoint of improving operations now or in the future.
As a national banker, I am disturbed. I have confidence in the Comptroller and his able staff. A change through the approval of the reorganization plan might well destroy what is now a highly efficient organization.
I can see no justification for taking away the present independence of the Comptroller.
For these reasons, the Indiana Bankers Association is opposed to Reorganization Plan No. 1 of 1950, and sincerely hopes you will see fit to disapprove it.
The CHAIRMAN. Are there any questions?
STATEMENT OF HAROLD V. AMBERG, REPRESENTING THE RE
SERVE CITY BANKERS ASSOCIATION; VICE PRESIDENT AND GENERAL COUNSEL, THE FIRST NATIONAL BANK, CHICAGO, ILL.
Mr. AMBERG. Mr. Chairman and members of the committee, I am Harold V. Amberg, vice president and general counsel of the First National Bank of Chicago, which, incidentally, opened for business on July 3, 1863, under National Bank Charter No.. I appear here on behalf of the Association of Reserve City Bankers at the direction of its president and members, being chairman of the Reserve City Bankers Association's committee on Federal relationships.
As you may recall, the Association of Reserve City Bankers is composed of 450 individuals who are executive officers of some 215 large commercial banks located in the numerous Reserve cities across the country, who represent a worthy cross section of informed banking opinion and also banks which in the aggregate hold a very large percentage of all resources of national and State-chartered commercial banks of the country.
At this year's annual meeting of our association held last week, its committee on Federal relationships reported to the members that on March 13 of this year the President had submitted to the Congress some 22 plans of reorganization, and that plan No. 1, in its effect on the Comptroller of the Currency and his functions, is of basic concern to chartered commercial banking. On the presentation and recommendation of our committee, the members of the association unanimously approved support of any effort aimed at a rejection of plan No. 1 as it affects the Comptroller of the Currency. This opposition of our association is based on the following considerations which were reflected in our committee discussions and to an appreciable extent in the necessarily limited scope of our committee's informal verbal report to the association's members at our meeting.
Plan No. 1 reads: there are hereby transferred to the Secretary of the Treasury all functions of all other officers of the Department of the Treasury and all functions of all agencies and employees of such Department.
We seriously doubt if the President of the United States has been fully advised of the full impact of this plan on the banking system and general economy of the country. We also hazard the surmise that the Secretary of the Treasury did not foment any proposal to disturb the present powers or status of the Comptroller of the Currency. The Comptroller of the Currency in the exercise of his current functions has not been viewed as a mere administrative agency of the Treasury Department. We proceed, however, on the assumption that under plan No. 1 all of the functions of the Comptroller of the Currency will be transferred to the Secretary of the Treasury when it becomes effective on May 11 unless rejected prior thereto by a constitutional majority of the Senate or the House of Representatives.
The Comptroller of the Currency has had a statutory status since 1863 when the national banking system was created by the Congress. The original dominant functions of the Comptroller of the Currency from which his title was derived—was “the execution of all laws passed by the Congress relating to the issue and regulation of a national currency secured by the United States bonds”; so it was quite logical that his office was lodged within the Treasury Department and that it was provided that in such respects he "shall perform his duties under the general direction of the Secretary of the Treasury.”
The circulation privilege relative to United States bonds expired by law in 1935, and the Comptroller of the Currency's functions in respect of this national currency lapsed. Another original primary function of the Comptroller of the Currency was the chartering and supervision of national banks. This function has persisted to date since 1863 and is now his major activity.
As you know, the Comptroller of the Currency is nominated by the President subject to the confirmation of the Senate. From 1863 to 1935, pursuant to statute, the Comptroller of the Currency was recommended to the President by the Secretary of the Treasury. In 1935, at a time when the Comptroller of the Currency's functions were reduced to substantially only those now performed by him, the Congress eliminated this then 72-year-old prerogative of the Secretary of the Treasury, to recommend to the President the one to hold this office—thus indicating its intent to fortify an independent status of the Comptroller of the Currency in respect of the functions to be exercised by him thenceforward.
If plan No. 1 becomes effective, the nomination by the President and the confirmation by the Senate of any Comptroller of the Currency will obviously be a futile gesture because the functions of the Comptroller of the Currency will have theretofore been transferred to the Secretary of the Treasury and the Comptroller of the Currency so appointed and confirmed can exercise such powers only to the extent they are delegated to him by the Secretary of the Treasury and, if so delegated, only for such time as it may suit the pleasure of the Secretary of the Treasury.
Åny Comptroller of the Currency functioning under such a tenuous grant of authority would clearly not be an independent agent or in any position to assert his independence. This is diametrically opposed to the congressional intent of 1935 when it was deemed advisable to deprive the Secretary of the Treasury of his right to recommend to the President the occupant of the Comptroller's office.
Another evidence of well-deliberated congressional intent is the Comptroller of the Currency's statutory right and duty to make an annual independent report directly to the Congress-withany recommendations he may care to make. Plan No. 1 is clearly subversive of this concept.
Moreover, The Comptroller of the Currency is appointed by the President for a 5-year term, subject to removal by the President "upon reasons to be communicated by him to the Senate.” His tenure of office is not synchronous with that of the Secretary of the Treasury. Here the Congress again bespeaks the independence of the Comptroller of the Currency's office.
If we are to maintain in this country the adequate, sound and competitive system of chartered commercial banking consistently built up under Federal laws passed by the Congress since 1863, it is essential that we maintain an independent status of the Comptroller of the Currency-in fact, more so now than ever before. The independent exercise of the powers of his office is basis to this end.
These powers fall roughly into four categories as follows. Gentlemen, I wish you would really note these to see how quasi-judicial they are.
First, control over the national bank systém, including the chartering of national banks; the approval of their branch offices, consolidations, conversions, recapitalizations and reorganizations; and powers in respect of the removal of their officers and directors, the forfeiture of their charters, the levying of assessments against their shareholders to restore impaired capital and the determination of insolvency procedures.
Second, examination and supervision of the policies and practices of national banks including the soundness and legality of their loans. Incidentally, the cost of such examinations of national banks, as fixed by the Comptroller, are paid by these banks and the Comptroller has domain over the resultant fund which defrays the entire expense of his operations.
Third-and this is the one I am sorry Senator Benton is not hearing—the promulgation of regulations relating to the type of investment securities permissible for national bank investment, which regulations, incidentally, are also binding on the State member Reserve system banks.
That means, gentlemen, the control of banks holding approximately 83 percent of the commercial banking resources of the country. I put out that figure which I think is accurate.
Fourth, serving as one of the three directors of the Federal Deposit Insurance Corporation.
These fundamentally quasi-judicial functions conferred progressively over the years since 1863 by Federal statutes have uniformly been delegated to the Comptroller of the Currency by name—with relatively very slight reference to the Secretary of the Treasury's participation in their performance.
He has controls over the appointment of examiners and all that, but otherwise they are given to the Comptroller by name.
Anyone having an intimate knowledge of the functioning of the country's commercial banking system, cannot conceivably envision the maintenance of an adequate, sound, and competitive commercial banking system in this country if the lending and investment policies of our National banks, and to a considerable extent our State banks, are to be supervised by other than an independent Federal agency charged solely with such functions divorced from any other Federal functions. Regardless of personalities, anyone charged with exercising such other functions, human nature being what it is and always will be, would be tempted to relate his supervision of banks to the purposes of his other functions.
For example, if the Federal Depoit Insurance Corporation were to supervise the lending and investment policies of commercial banks it would automatically tend to appraise the banks' loans and investments solely on a narrow conception of risk and the potential impact of such loans and investments on the Corporation's insurance fund and functions. Such would discourage courageous lending and lead to an inadequate banking system through a tendency to reduce commercial banks to some resemblance of pawn shops.
Again, if the Federal Reserve Board, which is charged with monetary controls, were to have primary supervision of the lending and investment policies of commercial banks, it would automatically tend to encourage overliberal policies in these respects in times of economic depression and over-restrictive policies in times of economic boom. Such certainly would not be conducive to a sound banking system, not to mention adverse influences in respect of the maintenance of an adequate and competitive system.
At its annual meeting in April of last year, our association went unanimously on record against the transfer of the functions of the Comptroller of the Currency to either the Federal Deposit Insurance Corporation or to the Federal Reserve Board. Incidentally, neither the Hoover Commission nor the President has suggested any such transfer. For similar reasons our association at its annual meeting last week went unanimously on record against the transfer of the Comptroller of the Curreny's functions to the Secretary of the Treasury. Incidentally, the Hoover Commission did not recommend any such transfer—Mr. Lawton yesterday inferred it was within the ambit of the Hoover Commission's report, and I shall come to that later, Mr. Chairman and members—in fact any recommendation to such effect would have violated the basic principle of organizing the executive branches on the test of "major purpose” which was adopted by the Hoover Commission in its first report. Moreover, a quite articulate minority of the Hoover Commission consistently opposed any recommendations in respect of "basic national policies embodied in Federal statutes”—as being beyond the Hoover Commission's province.
The Secretary of the Treasury is charged with several major functions not the least of which is the management of the national debt which is of serious concern to him as well as the Nation. If he were to be charged with the ultimate authority and responsibility of determining the lending policies of national banks and the investment policies of both National and State member banks, he would be more than human if he were not influenced by the pressures to relate such supervision to the needs of debt management. Such pressures clearly would potentially tend to reduce all banks to a pattern in respect of their loan and investment portfolios including Government bonds—to the detriment of an adequate and competitive chartered commercial banking system. We should not be unmindful of the outside pressures of a few years ago, within the last 5 years, no a little earlier than that, it was during the war, for compulsory Government bond subscriptions by chartered banks—successful resistance to which called for so much courage.
Parenthetically, in this instance the Comptroller of the Currency was vigorously supported by the then Secretary of the Treasury. Senator Benton will be glad to hear that. Moreover, it may be conceded that the primary responsibility for debt management lies properly in the Secretary of the Treasury but it does not follow that through a dominion over the chartered commercial banking system he should be put in a position, even potentially, to nullify indirectly the Federal Reserve Board's functions in respect of economic adjustments through monetary controls.
That is a serious consideration. It is a long story and too intricate for this discussion.
These considerations, all necessarily outlined here in bare skeleton form, have given rise to a school of thought that the functions of the Comptroller of the Currency should be exercised by an independent