I have had immediate supervision of all correspondence with national banks based upon the reports of examinations made by national bank examiners.
The records of the Comptroller's office show that the First National Bank of Canton, Pa., has been criticised for violations of law, irregularities, and unsatisfactory conditions by every one of the Comptrollers above named and by myself as Acting Comptroller, said criticisms being based on the reports of at least four different examiners. The subject matter of these criticisms varied and consisted of excessive loans, real estate unlawfully held, improper cash items, defective bookkeeping methods, unlawful investment in or purchase of stock, statutory bad debts, concentration of loans to allied interests of the president, and excessive liabilities of directors and other interests.
I first called the attention of John Skelton Williams, Comptroller of the Currency, to the condition of the First National Bank of Canton, Pa., in December, 1918. Prior to that time all the office correspondence with that bank in regard to its condition was conducted by me without consultation in any respect with the Comptroller. After the examination of the bank made by National Bank Examiner Kinzie B. Cecil on June 28, 1917, by my direction it was placed on what is known as the special list for frequent examination, and I advised the directors of this fact, and that it would be continued on the special list until all unlawful practices were discontinued and unsatisfactory conditions corrected. This same course was pursued in the case of every other national bank which was reported by the national bank examiner to be violating the law or in an unsatisfactory condition, and no exception was made in the case of the First National Bank of Canton, Pa. This bank was not placed on the special list by direction of the Comptroller, as alleged by complainant, and I never conferred with him in regard to this bank until December, 1918, when National Bank Examiner John K. Woods, in his report of examination of the First National Bank of Canton, Pa., made on November 20, 1918, suggested that Mr. Louis T. McFadden, president of the bank, and Charles A. Innes, cashier, be requested to come to Washington for a conference with the Comptroller. I then conferred with the Comptroller in regard to the condition of the bank, and told him how long it had been on the special list and arranged with him for a conference with Mr. McFadden and Mr. Innes at his office. I also informed him at that time that Mr. McFadden, the president of the bank, was a Representative in Congress and a member of the Banking and Currency Committee of the House of Representatives. I did not discuss with the chief examiner or with the Comptroller the selection of any examiner or examiners to make the examinations of this bank nor did I receive any instructions from the Comptroller as to the selection of such examiner. The examinations were made by examiners who were on duty in Pennsylvania at that time.
This bank had been subject to criticism for a number of years and was placed on the special list on account of its generally unsatisfactory condition, due to excessive loans, shortage in reserve, unlawful real estate holdings, slow and unsatisfactory loans, irregular cash items, unsatisfactory methods in reconciling bank balances, and persistent disregard of the law and admonitions of the Comptroller's office, and not because of "one small excessive loan" as alleged by the complainant in the bill filed in the case of First National Bank of Canton v. John Skelton Williams.
The suggestion in office letter of May 24, 1918, addressed to the board of directors of the First National Bank of Canton, and signed by the Deputy Comptroller, to the effect that - "if president McFadden is not inclined to observe the instructions of this office and the law he should be required to resign and the board should elect some one else as president who will," was not "made with the view to prejudicing the officers of the complainant against its president, McFadden, and for the purpose of forcing his removal as the complainant's president and visit upon him the disgrace thereto," as alleged in complainant's bill, but was a suggestion such as is frequently made to boards of directors of banks whose officers persist in disregarding the instructions of the Comptroller's office to discontinue violations of law and to correct irregularities. This suggestion is also made for the purpose of placing the responsibility upon boards of directors for continuance in office of any officer of the bank who is shown to have deliberately and persistently violated the law and is responsible for the bank's unsatisfactory condition.
The Comptroller had nothing whatever to do with the writing of the letter of May 24, 1918, either by way of dictation, suggestion, or otherwise, and never saw the letter or had any knowledge of its having been written until after the conference with Mr. McFadden in Washington on January 7, 1919.
It should be apparent from the foregoing that the frequent examinations of this bank and the special reports and information called for by the Comptroller of the Currency from time to time were not made because of the personal ill will entertained by Mr. Williams toward the president of the bank, as alleged in the complainant's bill, but were made necessary by reason of the continued unsatisfactory condition of the bank and the attitude of the dominant management who, because of the fact that he was a member of Congress, seemed to be under the impression that he was superior to law and the regulations of the Comptroller of the Currency.
It is greatly to be regretted that the hearing of this complaint was not pushed to a conclusion and a decision rendered by the court because of the importance of the question involved in the administration of the Comptroller's office and his supervisory powers over the national banks, but the resignation of Mr. Williams on March 2, 1921, brought the case to an abrupt termination without decision.