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i * ' - x> 131 BOARD OF BDVERNDRS or THE V ' FEDERAL RESERVE SYSTEM ffice Correspondence Chairman Eccles jj»rom &ate_ M *y 28,1942 Subject: Chester Morrill, Secretary Supplementing my previous memoranda regarding a plan for streamlining the Federal supervisory agencies in Washington, I attach a copy of some notes on this subject which were drafted by Mr. Leonard in connection with the discussions in which he, Mr. Wingfield, and I have participated. Attachment. K0TS8 OK PROPOSED JPLA& FOR 3TRj£AHLIfiIUG The proposed plan would result In savings wt personnel tad space in 'Washington through (1) elimination of duplication of functions, and (2) decantrail station of work. The maximum savings in expenses and personnel can only be accomplished over a period of time when the three separate organizations are shaken down and beco&e one smooth*running organization. Illaination of duplication of functions This consolidation of the three staffs into one would obviously result in elimination of overhead and duplication of effort. Instead of three secretarial staffs, three research departments, three legal divisions, thre® Gxauaiii&fcion and supervisory staffs, there would be only one of each* Instead 02" three organisations, for example, dealing with call reports and publishing comparable figures, there Mttld be @jaly one* Decentralization of work In essential part of the program is the delegation of administrative responsibilities to the field with authority to act under policies established bytiiashln&ton*Essentially, m far a& araainatloa, and *apsy vlsory #ork is concerned, the Washington staff wculd be a review and advisory staff rather than an operating staff. It is proposed that ta« supervisory districts bs co^tarainous with the Federal Resarve districts, that the field offices be at the Saserve Banks, end th&t there be close cooperation and exchange of information and personnel between the district offloe and the &eaerve £ank. This proposal is based on the following considerations: 1. All national banks in the country are iaeab©rs of the federal Eeserve ^ystesu 2* Member ban&s, including both national and ^>tat& member banks, hold 39 per cent or the deposit& of all insured commercial banks* (In some districts the percentage is higher. In Hew York, for example, it Is approximately 95 per cent.) 3, the Reserve Banks are set up to deal with member banks through their accounting departments, currency departments, examination departments, statistical departments, legal departments, etc. 4, The Federal Reserve System is flexible and in the 28 years of op* eration the Reserve Banks have acquired a broad background of experience which could be drawn upon in supervisory work* Attachments 1. Outline of proposed allocation or functions of the Examination Division as between the Washington office and the district offices. 2* Outline of proposed set-up of the ^xaaination Division* 3. Data indicating siae of the organisations involved in the proposed plan. 4* Other comments. Allocation of Functions of the Beam!nation Division. A suggested outline for the Examination Division 13 shown fox* illustrative purposes, as, except possibly for the Liquidation Division, it is the largest division in the over-all picture* Functions of aashlnffton Office 1. To assist In working on policy and on other aatt-.-ra referred to the staff, 2. To review reports of examination and analyses to see that the supervisory work is being properly done in the field, and to have a background of current information in working on policy and other matters referred to the staff, 3* To review and sub< recommendations on applications for purchases of preferred stock and of assets by the F*D*X»C», admissions to insurance, issuance of charters, and other matters involving policy which should not be delegated to the field* Functions of District Offices 1. 2. Examination of all insured banks and banks applying for Insurance* Analysis and review of reports of examination. (These analyses and reviews would be available to appropriate officers and employees of the Reserve mantes.) 3* Correspondence and conferences regarding corrective and other supervisory matters. 4*ftozfclngout of corrective and rehabilitation programs. 5, To review and act upon applications for such matters as: a. Admission of insured banks to membership in the Federal Reserve System* b. Capital reductions* mergers, absorptions, etc* c. Establishment of brandies. d. Trust powers* The applications would be approved in the field, upon concurrence by the District Chief and an appropriate coii<tee of the federal Reserve Bank, in accordance with regulations and policies established by Washington. In case of disagreement, the matter would be referred to tfeshlngton; in case of disapproval, the applicant would have right of appeal to Washington* 6. Analysis and submission with recommendations to Washington of applications for: a. Charters and deposit insurance. While charters will be issued and admissions to insurance approved in Washington, it is contemplated that ordinarily action on such applications will follow the recommendations from the field. In cases of appeal or whore a question of policy is raised, however, special consideration will be given* b* Purchases by the F*D*I.C. of preferred stock and purchases of assets and extension of loans by the F.D.I.C In order to minimize losses* Proposed Set-up of the Examination Division Washington Offloe , ithout accurate knowledge as to the • V $ M A . M £ 1 4 & I work, personnel of the three agencies, any proposal as to the staff of the stre&slined agency could be no more than a rough estimate for the purpose of discussion* On such basis it would seem that the Examination Division la the Washington office might h® set up along the lines indicated below. y Tile Chiefs At presenti in the three agencies 3 9 Assistant chiefs Review examiners Trust mem Examiners on hoXdlAf company affiliate and accounting matters Examiners on special ft»slf|Mi&ts ana studies Other examiners rroposed* 1 3 22 17 4 3 6 4 3 2 4 51 0 30 The 6t*f? would also laoltt&e9 of course, juniors, assistant inors,fteoretaries,and cl&ric&l personnel* Ko ©stiiaat® *»s to the number of ducii employees Is made, but the sariiigs indicated by the senior personnel should be indicative of the savings which might be effected in the junior personnel* In addltlont the plan provides for elimination of the following officers? Comptroller of the Currency 3 Deputy Comptrollers (one of whoa is engaged primarily la liquidation work) 2 Directors of the i.D.I.C. of th» officers %ould also eliminate positions on their personal staffs* (The 1940 Annual Report ©f the y.D.I.C. shows a total of 23 in the category "Directors and aides*1*} District Offices The consolidation of the field forces under one head in each of the 12 districts would likewise result in reduction of overhead, increased efficiency of administration, and a more effective use of the entire exam* ining personnel* No estimate of savings as to the field forces is ventured at this time, for it is believed that all of the available men will be needed, in view of the losses of personnel which the respective staffs have faced and are facing because of the war and the effect which the restrictions of tires and gasoline will have upon the volume of work turned out by the examiners* * Does not include any provision for personnel to handle the credit union work which is to be transferred to the F.D.I*C* as of May 16, 1942* Size of Organizations Involved. Comparable data as of the same date are not available, but the following figures taken from published data with respect to the Comptroller of the Currency and the F.D.i.C,t and unpublished data for the Federal Heserve Systea, indicate the size oi the organizations involved. Personnel laahingtoa Comptroller of the Currency (10-31-4lT"" Except Insolvent Kat'l Bank Div. & F. R. Issue & Redemption Div. 209 Except Liquidation Division 360 Board of Governors (12-31-41) Entire organization 461 Federal Reserve Bank® (1-1-42) Examination Departments only District & Field Offices Total 843 1.052 569 929 461 <•» 3^030 332 1,744 332 2,774 216 162 1,258 836 3,333 1,474 Ml Liquidation Division Comptroller of Currency (6-30-41) Federal Deposit Ins. Corp, (12-31-40) Expenses Total expenses of Comptroller of Currency Fiscal year ending 6* 30-41 Less reimbursed a/o I. R, note Issues $1,617,000 Insolvent NatU Bk, Div. 643,000 1/ #6,163,000 2^260,000 #3f903,0OO 1/ 1T»D*I.C« - Calendar year 1941 Administration exp. & other charges 3.695,000 2/ Board of Governors - Calendar year 1941 - Tot&l expenses 1,745,000 Federal Reserve Banks - Calendar year 1941 Examination Departments 1,316.000 #10,661,000 1/ Does not include expenses of field receivers and their staffs. (Total number 1,258 as of 6-30-41*) 2/ Does not include #2,145,000 "deposit insurance losses and expenses*• Other Commenta. Other Divisions No attempt is here made to give data with respect to the other divisions. The sayings and increase in efficiency to be expected in the other divisions through the consolidation should correspond more or lest to that indicated for the Division of &xasiinations, which has been chosen as an illustration* Liquidation Work Current information is not available as to th© number of persons engaged in handling bank liquidation activities for the federal banking agencies. According to published data, however: On December 31, 1940, the F.D.I.C. had in its Division of Liquidation 99S officers and employees, of whoa 162 were is the Washington office and 836 were in district and field offices. 0a June 30, 1941, the Division of Insolvent National Banks of the Office of the Comptroller of the Currency, had the following personnel: 66 field receivers 1,192 field receivers* clerks and other employees 216 Washington office employees* Apparently in neither ease do the figures include the legal staffs engaged in handling liquidation activities. Liquidation work is a dwindling activity with the old receiverships being wound up* A better organization, however, would result by combining the work into one staff*. It is proposed that in liquidation work, as in examination and supervisory work, the principle of decentralisation be followed to the greatest extent practicable, using the facilities of the Reserve ^anks and of the combined forces wherever possible* Credit Unions It is proposed that the administrative and supervisory work with respect to credit unions which has Just been transferred to the F.D*I.C. be integrated with the other examination and supervisory work*
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