This policy of administration originated with Mr. Murray. He is entitled to all the credit that may be due for any good results and all the blame that attaches to the failure of such a policy.

At a dinner given in New York City in 1909, in Mr. Murray's honor, by a prominent banker, at which a number of bankers were present, he made a brief address in which he reviewed the reforms that he had inaugurated in the administration of the Comptroller's office, and others that he contemplated making. Upon his return to Washington, in referring to this dinner, he made the statement that what most pleased the bankers who were present on that occasion was his statement that he did not intend to write them any annoying letters criticising non-essentials in the management of their banks; and he gave directions to the office force that no letters should be written to the banks which were calculated to annoy them.

This original and novel method of Mr. Murray's in handling the reports of national bank examiners had the effect of reducing the number of reports upon which it had been the practice to write letters of criticism from about sixty per cent, to an average of about five per cent, of the total number received each week. In other words, where it formerly was found necessary to write the banks on sixty out of every hundred reports of examination received, under the reform policy of not annoying the banks with letters only five letters were written on every hundred reports received. But the banks were in the same average condition during this period of non-annoyance as they were when the former practice prevailed of writing on every violation of law that was shown by an examiner's report, and the percentage of reports showing violations of law of various kinds was about the same.

When the reports of bank examiners disclosed violations of law or other loose and dangerous practices, it was the duty of the Comptroller to require the bank to correct them, regardless of how annoying such communications might be to the banks receiving them, and when he failed to do this through fear of giving annoyance, or because of the unpopularity of such a policy, he was derelict in the performance of his duty and unsuited to hold the office of Comptroller.

In the exploitation of this so-called reform the erroneous impression was created in the public mind that the condition of the banks as a whole had been greatly improved in consequence of the improved method of examinations, making it necessary for the Comptroller's office to write letters of admonition to only five out of every hundred banks examined where formerly it was necessary to write such letters to sixty out of every hundred banks examined. Official bulletins were issued to the examiners and given general publicity, declaring that there was not a bank on the entire list that was in an unsatisfactory condition and that bank failures were occurrences of the past. But at the very time those bulletins were issued and this declaration made, the Comptroller was daily writing banks that because of their unsatisfactory condition they would be thereafter examined every three months, and other banks were being forced into voluntary liquidation to avoid receiverships.

Of the more than two hundred examiners' reports received weekly, probably fifty per cent, of that number contained violations of law in the nature of excessive loans, deficiency in lawful money reserve, money borrowed in excess of the capital stock, real estate loans, stock investments and other transactions of an unlawful nature, to say nothing of numerous other irregularities of a more or less objectionable nature.

The excellent results attained by Mr. Murray's immediate predecessor in vigorously endeavoring to compel the banks to observe the law in regard to the limit of loans were almost wholly destroyed by Mr. Murray's laxity in the enforcement of this provision of the statute. A large percentage of the reports of examiners that were passed without action for the purpose of avoiding the writing of letters to the banks that would annoy them, disclosed violations of this limitation varying in amount from $500 to $75,000 or $80,000 in excess of the legal limit. And the rule of action laid down by Mr. Murray for the guidance of the clerks whose duty it was to examine these reports and prepare the letters of criticism, was that no excessive loan should be criticised unless it was regarded by the examiner as unsafe or insufficiently secured. Yet the law made no distinction between a secured and an unsecured loan in fixing the limit, but required that no loan, no matter how secure, should exceed the limit prescribed by the statute.

As a reason for not criticising deficiencies in reserve, Mr. Murray stated that the United States was the only country in the world that had such a foolish law, that the banks complained of its hardship, and that he did not propose to require them to observe it. He stated further in regard to this provision of law that it was not necessary to call the attention of banks to a shortage in reserve, or to require them to make the deficiency good, as they knew the law as well as the Comptroller, and knew when they were violating it. In many cases the deficiencies in reserve were very large and the banks that were short were chronically deficient.

Later in his administration he was compelled to change his views in regard to the necessity for maintenance of the legal reserve, and to issue a special letter to the banks that were deficient, warning them that they were subject to a receivership for violating the law in this respect and would thereafter be examined every thirty or sixty days until the legal reserve was maintained. Money borrowed by one bank from another, largely in excess of the legal limit and concealed by subterfuges in one form or another, was not allowed to be written on, for the reason, Mr. Murray stated, that "the business of this country cannot be carried on by any hard and fast laws. The banks must be given some latitude."