The rotation of bank examiners has been frequently suggested as a means of increasing the efficiency of the force and the effectiveness of examinations, but this practice never had been followed to any great extent by the Comptroller's office until Mr. Murray's administration. The merits of the plan had been thoroughly considered by former Comptrollers, with the conclusion that while rotation may have some advantages over the system of permanent assignments, it has also its disadvantages, and the latter were believed to greatly outweigh the former. The more familiar an examiner becomes with the financial responsibility and business reputation of the makers and endorsers of the paper which he finds in a bank, the more accurately he is able to estimate the worth of the bank's loans and to determine the value of its securities. This knowledge cannot be acquired by one or two examinations of a bank, but the examiner who remains for a considerable time in a district, handles the same paper so frequently that its worth becomes as well known as the market value of a Government bond, whether the paper be that of an individual, a firm, or a corporation.
Probably the strongest, and, in fact, the only argument that can be advanced in favor of rotation, is that when an examiner has been regularly assigned to a district for a long time, he may become too well acquainted and too intimate with the officers of the banks he examines, and becomes too trustful in their representations to him. He may take too much for granted and rely upon their statements instead of verifying everything and satisfying himself through other sources of information as to the value of assets. There have been instances of this kind in the past, and there no doubt will be others in the future, but they are the exception and not the rule.
To guard against this contingency, it had been the practice of the Comptroller's office for years to divide the country into examination districts. Each district, with a few exceptions, had two examiners, who exchanged their list of banks in the district every six months and alternated in their examinations.
While regular rotation of examiners is not believed to be advantageous, there always has been more or less detailing from one district to another. When the work of an examiner falls in arrears in consequence of sickness, absence on leave, or assignment to special duty, an examiner from another sub-district whose work is up to date, is usually detailed to make examinations in the territory in arrears, and such details have been made frequently.
When the regular examiner for a district found a bank in a very unsatisfactory condition, requiring more time to thoroughly examine it than he could afford to devote to the work under the old system of compensation, he usually reported the situation as he understood it to the Comptroller and suggested the advisability of a special examination. For a special examination a per diem was provided, chargeable to the special examination fund appropriated by Congress for that purpose. The examiner was expected and required to remain in the bank as long as was necessary for him to determine accurately its condition, and, if possible, to have its affairs placed in a satisfactory shape.
Before the advent of the so-called examiner-at-large, under Mr. Murray's administration, the regular examiners were usually authorized to make such special examinations. They did the work fully as well, and at less expense. Being in the vicinity of the bank, they consumed less time in travel in reaching the locality, and were more familiar with the situation. It did not follow, therefore, that because an examiner-at-large was detailed to make a special examination in another examiner's district, that the former was superior in ability to the regular examiner for that territory, as the reverse was frequently the case, and there were any number of examiners on the regular force who were the equals in ability of any of those who were designated examiners-at-large, and could have accomplished as satisfactory results through a regular examination had they been allowed the same rate of compensation. In fact, there were instances where regular examiners were detailed to review the work of examiners-at-large.