What has been said in regard to the conditions in Iowa and the policies of the Federal Reserve Bank and its examiners may also be said of other Federal Reserve districts where similar conditions existed and like methods were resorted to.
In some cases banks were forced to suspend business and close their doors, either by the voluntary action of the board of directors, because of their inability to meet the exactions of the Federal Reserve examiners, or by the examiner's direction, an assumption of authority which he did not possess. In a number of cases banks were urged to the point of insistency to dispose of their Liberty Bond holdings at a considerable loss, for which they had paid par at the time of their issue, when each Federal Reserve Bank was alloted by the Government a certain amount of the total issue and each member bank was urgently solicited to take its proportionate share of such allotment.
It was alleged by the president and cashier of a national bank in Montana that the bank was closed by the Helena branch of the Minneapolis Federal Reserve Bank for political reasons, and that the Helena branch withheld from the bank further rediscount privileges at a critical time in order to force the bank into insolvency. They charged that this was due to the influence of the chairman of the board of the Helena branch bank, who owned a controlling interest in a Montana State bank, a competing bank of the national association which was closed.
It was asserted further that without authority or approval the examiner of the Helena branch called at the national bank on July 26, 1921, and under threats and duress compelled the cashier of the bank to accept a receipt for certain notes that he took from the bank's portfolio, as excess collateral amounting to $17,472.45. The cashier further asserted that this paper was the very best security in the bank for rediscount purposes and without it the bank was left in a very precarious financial condition. He attributed the failure of the bank to the loss of this paper, and stated that after complaining to the Helena branch of the action of the examiner and making several demands for the return of this paper, some of it was returned to the bank on October 5.
It was stated that the cashier of this bank was a young man of but limited experience and was easily swayed by the predominating influence of the Federal Reserve examiner, and after making futile efforts to secure help elsewhere than from the Federal Reserve branch and without the backing of the directors of his bank, he telephoned the manager of the Helena branch that he was through and would close the bank and post a notice on the window that it was closed.
He stated further that after closing the bank and before the arrival of the national bank examiner to take charge, the manager of the Helena branch of the Federal Reserve Bank telephoned him a request to send to the Helena branch certain notes held by the bank in trust for the reserve bank, which, he stated, he refused to do as he had no right to dispose of any of the property or assets of the closed bank prior to the arrival of the national bank examiner.
Another occurrence was reported to the Comptroller's office of a small State member bank in the eleventh Federal Reserve district, which had been hard pressed for funds and was badly in need of assistance owing to the business depression in that section of the country.
It was stated that a representative of the Federal Reserve Bank called at this bank and demanded of the cashier that he turn over to him all the available cash the bank then had on hand, to protect the Federal Reserve Bank from loss on advances that had been made to the bank, and that, after making a futile protest, he complied with this demand and the representative of the Federal Reserve Bank took away with him every dollar of cash the bank had, even to the nickels and cents, so that there was nothing else for the cashier to do but to suspend business and close the doors of the bank.
It is not believed by anyone familiar with the operations of the office of the Comptroller of the Currency that the affairs of that bureau can be satisfactorily, promptly and efficiently administered by a board requiring unanimity of its members as it has been or can be by a single responsible head with authority to act upon his own responsibility. Many of the affairs of the bureau require such prompt decision and quick action during the business hours of the day and after business hours as would be impossible to obtain from a board. Instructions to bank examiners and receivers of failed banks as to critical banking situations and important business transactions are frequently required to be given by telegraph or telephone during all hours of the day and night.
With very few exceptions the supervision of State banks is conferred by law upon one official, and even in States where supervision is conferred upon boards there appears to be the delegation of executive power to a single head. Within the past few years California and Connecticut changed their laws to provide for a Superintendent or Commissioner of Banking in lieu of a board. In the State of Nevada the banking board is composed of the Governor and a State bank examiner, but the duties of the board appear to be conferred upon the examiner, who is practically the single executive head of the board.
As independent bureaus the duties of the Federal Reserve Board and those of the Comptroller of the Currency are distinctly separate and well defined. To unite the bureaus would create confusion and to a certain degree inefficiency. It would also be necessary to amend the national banking laws in many respects to avoid complications, as the simple transfer of the powers and duties of the Comptroller to the Federal Reserve Board would not be ample to cover the situations which would ensue.
The national banks are now under the supervision of the Comptroller of the Currency, who is a member of the Federal Reserve Board. He participates in the deliberations of that body and has a voice in their conclusions. The proposed change would not in any way alter results. If the two bureaus were merged it would be necessary for the board to designate some one of its members as the executive head of what is now the Comptroller's office, with full power to act upon his own responsibility in regard to all matters which could not be delayed for board action. This would be practically the same condition as exists at the present time. The Comptroller is the executive head of the bureau and is a member of the board. The only effect of the proposed change, therefore, would be to delay action on all matters which required consideration by the full board.