The fee system of compensation of national bank examiners was principally, if not wholly, responsible for the impression that prevailed, and which the indiscriminate remarks of Mr. Murray intensified, that examinations were made too hurriedly and that to this fact was due the failure of examiners in the past in some instances to discover the conditions to which Mr. Murray alluded in his excoriating address at the time of the examiners' meeting in Washington.
Failure to discover defalcations, embezzlements or other criminal wrongdoing through several successive examinations, as alleged by Mr. Murray, because of the fact that the examiner did not devote sufficient time to the examination of the bank, were very rare. Failure to discover shortages or other criminality was due to other and varied causes.
But this does not alter the fact that the fee system of compensation was inherently wrong and was conducive to hurried work. A competent and conscientious examiner would render better service for a commensurate compensation than he could afford to give for an inadequate fee. An inefficient examiner should not be retained in the service under any circumstances, and if one should be found, good administration would require that he be instantly removed and not retained to the discredit of the entire force and the service which he represents. It was unreasonable to expect or to require an examiner to remain in a bank long enough to make a complete audit of its affairs, extending over a period of several days, for a compensation of twenty or twenty-five dollars, in a small institution, and a proportionately larger fee in a larger institution, varying with the amount of the capital of the association, and out of such meagre allowance pay his railroad fare, hotel bills, clerk hire and all other incidental expenses. The surprising feature of this situation was that the examiners whose districts extended over considerable territory, necessitating constant travel, rendered as good and as reliable services as the records of the Comptroller's office show them to have rendered under the fee system of compensation.
When it was demonstrated to the Commission how small the net compensation of many of the examiners was, after deducting all expenses, in answer to a question by a member of the Commission as to whether competent examiners could be obtained for such a compensation, Mr. Murray stated that he had on file about one thousand applications for appointments and that every one of the applicants, or, at least, a majority of them would meet the qualifications required for such a compensation. He stated that he could obtain some very good men for two thousand dollars a year, young men who were very good accountants and expert bookkeepers, who would develop into good examiners.
In making such a statement, Mr. Murray only displayed his ignorance of the essential qualifications of an examiner. While a knowledge of accounting and bookkeeping is a necessary requisite in the examinations of banks, there are other qualifications far more important which are difficult to find in a man who is willing to accept such employment for the meagre compensation of two thousand dollars a year gross. Mr. Murray admitted this fact further on in his testimony before the commission when he inconsistently stated that he had made it a rule since he became Comptroller to appoint no one an examiner who was not as good a judge of credits and had as fair a knowledge of modern banking as the officers of the banks that he was called upon to examine.
Experience in the appointment of bank examiners has demonstrated that some of the very best men in the service never had been employed in a bank, but their general business experience had been such as to broaden their views and make them excellent judges of credits, competent to size up an unsatisfactory situation or dangerous condition and to suggest the remedies therefor.
While it is very essential for an examiner to thoroughly understand bookkeeping and the general routine work of a bank, the records of the Comptroller's office show that the man whose training has been restricted to the narrow lines of a bank bookkeeper, without other business experience, does not develop into as good and as reliable a judge of credits as quickly, if at all, as the man of broad business experience with no previous bank training. The latter easily learns the details of bookkeeping and the routine work of the bank, while it is difficult for the former to reach the standard of good judgment and discretion which the latter possesses.
Adherence to the rule, therefore, to appoint no one a bank examiner who had not had a banking experience, which Mr. Murray declared would be his policy while Comptroller, but which he did not adhere to, would deprive the service of a class of men such as described, who in a number of instances have proven to be first-class examiners and the most efficient men in the service.
The principal qualifications an examiner should possess to insure his rising above the average accountant are force of character, resourcefulness and good judgment. If an examiner does not possess these qualities and cannot cultivate them, he may be an expert bookkeeper and an excellent accountant, but he never will rise above the ordinary in this line of work.
It was difficult to attract to or retain in the service the type of men who make the best examiners on account of the meagre compensation allowed under the fee system. Men of this class were found to be engaged as auditors or public accountants, receiving a much higher rate of compensation than examiners received for the same class of service, and neither the Comptroller of the Currency nor anyone else could employ such men at a net compensation of two thousand dollars a year.
Mr. Murray made the further statement before the commission, in connection with the suggestion that examiners be placed under the civil service, that while he was a strong believer in the competitive examination system as a test of fitness for public service, he doubted very much whether by any system of examination an applicant's qualifications for employment as a national bank examiner could be reliably determined. He said an examiner must have some presence. He must have good judgment. He must have tact, and these cannot be determined by his ability to answer questions.