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C O P Y BANK OF AMERICA N a t i o n a l T r u s t and Savings A s s o c i a t i o n San F r a n c i s c o H e a d q u a r t e r s San F r a n c i s c o , California Hayflower H o t e l Washington, D. C. F e b r u a r y 20, 1940 Mx . C. 3 . TJpham Leputy C o m p t r o l l e r o f t h e Currency Washington, D. C. Dear S i r : T h i s has r e f e r e n c e t o y o u r l e t t e r d a t e d F e b r u a r y 16 r e g a r d i n g t h e proposed p r o c e e d i n g b e f o r e t h e s p e c i a l r e p r e s e n t a t i v e o f t h e Comptroller. The C o m p t r o l l e r s l e t t e r o f January 11 announced a p r o c e e d i n g t o be h e l d b e f o r e a " s p e c i a l r e p r e s e n t a t i v e o f t h e C o m p t r o l l e r o f t h e C u r r e n c y " . B u t i n h i s w i r e o f January 20 t o t h e S e c r e t a r y o f t h e Board o f D i r e c t o r s o f o u r Bank he r e f e r s t o t h e p r o c e e d i n g as g i v i n g t h e Bank " a n o p p o r t u n i t y t o p r e s e n t b e f o r e a d i s i n t e r e s t e d t r i b u n a l any r e l e v a n t m a t t e r . " Without attempting a t e c h n i c a l d e f i n i t i o n of a d i s i n t e r e s t e d t r i b u n a l , i t seems t o me t h a t under t h e American t h e o r y o f government a d i s i n t e r e s t e d t r i b u n a l i s one l i k e a c o u r t w h i c h i s e s t a b l i s h e d by cons t i t u t i o n o r s t a t u t e , independent o f e i t h e r t h e e x e c u t i v e o r t h e l e g i s l a t i v e branches o f government. The C o m p t r o l l e r s l e t t e r o f January 11 g i v e s n o t i c e o f a p o s s i b l e p u b l i c a t i o n o f t h e r e p o r t o f e x a m i n a t i o n o f t h e Bank as o f March 31> 1939 w h i c h e x a m i n a t i o n was completed J u l y 21, 1939- S i n c e t h e n , t h e r e was comp l e t e d on December 20, 1939 t h e r e p o r t o f t h e e x a m i n a t i o n o f t h e Bank as o f August 31» 1939 • The December r e p o r t o f e x a m i n a t i o n shows t h a t t h e J u l y r e p o r t o f e x a m i n a t i o n c o n t a i n s erroneous c o n c l u s i o n s and d e f i n i t e m i s s t a t e m e n t s o f f a c t and t h a t t h e c o n d i t i o n o f t h e a s s e t s commented on i n t h e J u l y r e p o r t has improved s i n c e March 31» 1939i s thus evident t h a t p u b l i c a t i o n o f t h e J u l y r e p o r t o f e x a m i n a t i o n would r e s u l t i n m i s l e a d i n g t h e p u b l i c as t o t h e c o n d i t i o n o f t h e Bank. We do n o t b e l i e v e t h a t t h e C o m p t r o l l e r w o u l d choose t o do t h a t . I f i t were p u b l i s h e d , c l e a r l y t h e r e s p o n s i b i l i t y t h e r e f o r would n o t be t h a t o f t h e Bank o r i t s D i r e c t o r s . M r . 0 . B . Upham - 2 F e b r u a r y 20, 1940 - The o n l y o t h e r " s a n c t i o n " e x p r e s s l y mentioned i n t h e C o m p t r o l l e r ' s l e t t e r o f January 1 1 i s t h e p o s s i b l e t r a n s m i t t a l t o t h e Board o f Governors o f t h e F e d e r a l Reserve System o f " a c e r t i f i c a t e f o r t h e removal o f d i r e c t o r s and o f f i c e r s o f t h e Bank^" We b e l i e v e t h a t t h e C o m p t r o l l e r has no a u t h o r i t y t o do t h a t b u t t h a t , i n c o n f o r m i t y w i t h t h e s t a t u t e , he "may c e r t i f y t h e f a c t s t o t h e Board o f Governors o f t h e F e d e r a l Reserve System." We u n d e r s t a n d t h a t such c e r t i f i c a t i o n i s t h e means p r o v i d e d by lav/ t o a r r i v e a t a d e c i s i o n on t h e q u e s t i o n s such as those now p e n d i n g between t h e C o m p t r o l l e r and t h e Bank:. Since t h e C o m p t r o l l e r a l o n e has t h e power t o decide whether such a c e r t i f i c a t i o n s h a l l be made, a p r o c e e d i n g b e f o r e any o t h e r person t o t h a t end n e c e s s a r i l y would be f u t i l e , because such person c o u l d n o t make t h e decision. F r a n k l y , we do n o t u n d e r s t a n d why t h e C o m p t r o l l e r s h o u l d contemp l a t e i n v o k i n g any " s a n c t i o n s " a g a i n s t t h e Bank i n v i e w o f i t s c o n t i n u o u s and s u b s t a n t i a l p r o g r e s s . As one i t e m o f such p r o g r e s s , t h e December r e p o r t shows t h e a d j u s t e d c a p i t a l s t r u c t u r e o f t h e Bank as computed by t h e N a t i o n a l Bank Examiner t o be more t h a n $ 1 0 0 , 0 0 0 , 0 0 0 , a f t e r g i v i n g e f f e c t t o a l l d e d u c t i o n s made by t h e Examiner f o r i t e m s c l a s s i f i e d by him as d o u b t f u l o r l o s s , i n w h i c h c l a s s i f i c a t i o n s we cannot c o n c u r . The f i g u r e f i x e d by t h e Examiner shows an i n c r e a s e o f more t h a n $ 7 , 0 0 0 , 0 0 0 i n f i v e months o v e r t h e B a n k ' s a d j u s t e d c a p i t a l s t r u c t u r e as shown by t h e E x a m i n e r ' s f i g u r e s i n the next preceding r e p o r t of examination. R e p r e s e n t a t i v e s o f t h e Bank a r e now engaged i n an e f f o r t t o come t o an u n d e r s t a n d i n g w i t h t h e C o m p t r o l l e r . I f t h a t e f f o r t should f a i l and t h e C o m p t r o l l e r s h o u l d d e c i d e t o c e r t i f y t h e f a c t s t o t h e Board o f Governors o f t h e F e d e r a l Reserve System, t h e o f f i c e r s and d i r e c t o r s , c o n f i d e n t - t h a t t h e y a r e o p e r a t i n g t h e Bank i n accordance w i t h law and s a f e and sound b a n k i n g p r a c t i c e , w i l l welcome t h e o p p o r t u n i t y t o p r e s e n t t h e m a t t e r b e f o r e t h a t B ^ a r d i n t h e hope t h a t a h e a r i n g t h e r e may r e s o l v e t h e e x i s t i n g d i f f e r e n c e s . Very t r u l y (Signed) yours, L . M. G i a n n i n i L . M. G i a n n i n i , P r e s i d e n t BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION.
