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COPY THE COMPTROLLER 0? THE CURRENCY' Washington February 21, 1940 Honorable M a r r i n e r S* Eccles Chairman, Board of Governors F e d e r a l Reserve System Washington, D. C* Dear Mr* Chairman: There are enclosed herewith f o r your f i l e s copies of the f o l l o w i n g correspondence p e r t a i n i n g t o the Bank of America N . T . & S , A , m a t t e r : Feb* 14, 19^0 L e t t e r t o the Comptroller from Mr* Cushing Feb* 16, 19A0 L e t t e r from the Deputy Compt r o l l e r t o Mr* Cushing Feb* 20, 1940 L e t t e r from L . M* Giannini t o M r . TJpham* V e i y s i n c e r e l y yours, (signed) Ends* Preston Delano Preston Delano C O P Y CUvHING k CUSHIKG A t t o r n e y a t Laii 1 Montgomery S t r e e t San F r a n c i s c o , C e l . Mayflower Hotel W a s h i n g t o n , P . C. F e b r u a r y 1 4 , 1940 Honorable F r e e t o n Delano C o m p t r o l l e r o f tb© C u r r e n c y V s e s h i n g t o n , D . C. Dear Sir: T h i s -has r e f e r e n c e t o y o u r c o m m u n i c a t i o n t o t h e Bank: o f A a e r l c e K . T . k S . A* and i t s D i r e c t o r s d a t e d J a n u a r y 1 1 t 1940 i n w h i c h y o u announce a p r o c e e d i n g f o r t h e p u r o s e s s e c i f i e d i n y o u r c o m r u n i c n t i o n , on F e b r u a r y 14 b e f o r e H e n r y U , B a t e s as your special representative. We b e l i e v e y o u have been a d v i - e d b y I v r r a r d , the S e c r e t a r y o f t h e B a n k , t h a t we a r e a u t h o r i s e d t o r e p r e s e n t t h e Bank: and i t s D i r e c t o r s . 12 U . c . C . A . , S e c t i o n 484 p r o v i d e s t h a t *Ko bank s h a l l be s u b j e c t t o any v i t i t o r i a l p o w e r s o t h e r t h a n s u c h ae a r e a u t h o r i z e d by law e * » . * I n our o p i n i o n , the ; roposed proceeding i n v o l v e s t h e e x e r c i s e o f v i s i t o r i e l powers w h i c h a r e n o t a u t h o r i z e d by l a * and a n y d e c i s i o n o f y o u r r e p r e s e n t a t i v e r o u l d have no l e g a l v a l i d i t y and %ould b i n d n e i t i ^ r y o u n o r t h e B e n * . One u r p o s e o f t h e p r o c e e d i n g , aa d e s c r i b e d i i y o u r copasuni c a t i o n , r e l a t e s t o t h e p o s s i b i l i t y o f a h e a r i n g b e f o r e t h e B o a r d o f G o v e r n o r s o f t h e F e d e r a l l i e s e r v e System p u r s u a n t t o a s t a t u t e ( 1 2 U . S . C . A . , S e c t i o n 77) w h i c h p r o h i b i t s p u b l i c i t y o f any o r d e r o f t h e B o a r d and f i n d i n g s o f f a c t u on w h i c h i t i s based. The p u b l i c i t y t h f t t h a s a l r e a d y been g i v e n t o y o u r n o t i c e o f t h e p r o p o s e d p r o c e e d i n g seems t o r u n c o u n t e r t o t h t s t a t u t e . The B a n k , o f c o u r s e , i s H i l l i n g t o g i v e y o u a n y i n f o m t t i o o f o r w h i c h y o u may a s k c o n c e r n i n g i t s b u s i n e s s o r a f f a i r s , b u t t h e Bank and i t s D i r e c t o r s v e r y r e s p e c t f u l l y d e c l i n e t o p a r t i c i p a t e i n t h i s proceeding* Your very respectfully, CU&EI&G k CtffcHIKG By s / 0 . K . Cusl i n g COPY February 16, 1940 0* K. Cushing, Esq. Mayflower H o t e l , Washington, D.C. Dear Mr. Cushing* I n the Comptroller's absence I am acknowledging your l e t t e r of February 1 4 , 1940 d e c l i n i n g on behalf of the Bank of America H . T . & S.A. and i t s d i r e c t o r s to p a r t i c i p a t e i n the proceeding before Henry M. Bates as h i s r e p r e s e n t a t i v e , which was scheduled to commence on February 1 4 , 1940 and which i s now under way* The reasons which you give f o r not p a r t i c i p a t i n g a r e , b r i e f l y , f i r s t , t h a t the proceeding involves the exercise of v i s i t o r i a l powers not authorized by l a w , and second, t h a t the p u b l i c i t y already given the proceeding runs counter t o law* As was pointed out i n the Comptroller's telegram of January 20, 1940 t o Mr. Everard, Secretary of the Board of D i r e c t o r s of the Bank, the purpose of the proceeding was t o provide the Bank and i t s d i r e c t o r s w i t h an opportunity t o present before 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 matter before f i n a l a c t i o n i s taken by the Comptroller w i t h respect to sanctions authorized by law. I t seems obvious t h a t a proceeding of t h i s character does not involve i n any way the exercise of unauthorized v i s i t o r i a l powers. The responsib i l i t y f o r d e c l i n i n g to take advantage of the opportunity thus o f f e r e d them i s one which must be borne by the Bank and i t s d i r e c t o r s . I am sure t h a t the Comptroller shares your r e g r e t w i t h reference t o t h e p u b l i c i t y t h a t has been given i n the press to the proceeding. However, I r e p e a t the assurance which was given you i n the C o m p t r o l l e r ' s o f f i c e t h a t no one connected w i t h t h e Treasury Department i s responsible i n any way f o r the p u b l i c i t y , and any i m p l i c a t i o n i n your l e t t e r to the contrary i s i n f a c t without any foundation whatsoever* Very s i n c e r e l y yours, Deputy Comptroller of the Currency HOT CC Cushing & Cushing, 1 Montgomery S t . , San F r a n c i s c o , C a l i f o r n i a * C O P Y BANK OF AMERICA N a t i o n a l T r u s t ahd Savings Association San Francisco Headquarters San Francisco, California Mayflower H o t e l Washington, D. C. February 20, 1940 Mr. C. B* TJpham Deputy Comptroller of the Currency Washington, D. C. Dear S i r : This has reference to your l e t t e r dated February 16 regarding t h e proposed proceeding before the s p e c i a l r e p r e s e n t a t i v e of the Comptroller. The Comptroller's l e t t e r of January 1 1 announced a proceeding t o be held before a " s p e c i a l r e p r e s e n t a t i v e of the Comptroller of t h e Currency*1 * But i n h i s w i r e of Januaiy 20 to the Secretary of the Board of D i r e c t o r s of our Bank he r e f e r s t o the proceeding as g i v i n g the Bank "an opportunity t o present before 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 matter. 1 1 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 theory of 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 court which i s established by cons t i t u t i o n or s t a t u t e , independent o f e i t h e r the executive or the l e g i s l a t i v e branches o f government. The Comptroller's l e t t e r o f January 1 1 gives n o t i c e of a possible p u b l i c a t i o n of the r e p o r t of examination of the Bank as of March 31, 1939 which examination was completed July 21, 1939• Since then, there was comp l e t e d on December 20, 1939 the r e p o r t of the examination of the Bank as of August 31, 1939. The December r e p o r t of examination shows t h a t the J u l y r e p o r t of examination contains erroneous conclusions and d e f i n i t e misstatements of f a c t and t h a t the condition of the assets commented on i n t h e J u l y r e p o r t has improved since March 31, 1939• I t i s thus evident t h a t p u b l i c a t i o n of t h e J u l y r e p o r t o f examination would r e s u l t i n misl e a d i n g the p u b l i c as t o t h e condition of the Bank. We do not b e l i e v e t h a t t h e Comptroller would choose t o do t h a t * I f i t were published, c l e a r l y the r e s p o n s i b i l i t y t h e r e f o r would not be t h a t of t h e Bank or i t s D i r e c t o r s * M r , C. B . TJpham ~ 2 ~ Februaiy 20, 1940 The only other "sanction* 1 expressly mentioned i n the C o m p t r o l l e r ' s l e t t e r of January 1 1 i s t h e possible t r a n s m i t t a l t o t h e Board of Governors of t h e F e d e r a l Reserve System of "a c e r t i f i c a t e f o r t h e removal of d i r e c t o r s and o f f i c e r s o f t h e Bank:.*1 We b e l i e v e t h a t the Comptroller has no a u t h o r i t y t o do t h a t but t h a t , i n conformity w i t h the 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 of Governors of the F e d e r a l Reserve System." Xle understand t h a t such c e r t i f i c a t i o n i s the means provided by law t o a r r i v e a t a d e c i s i o n on the questions such as those now pending between t h e Comptroller and t h e Bank. Since t h e Comptroller alone has the 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 proceeding b e f o r e any other 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 could not make t h e decision* F r a n k l y , we do not understand why t h e Comptroller should contemp l a t e invoking any "sanctions" against t h e Bank i n view of i t s continuous and s u b s t a n t i a l progress* As one i t e m o f such progress, t h e December re- % p o r t shows t h e adjusted c a p i t a l s t r u c t u r e of the Bank as computed by t h e N a t i o n a l Bank Examiner t o be more than $ 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 deductions made by t h e Examiner f o r items c l a s s i f i e d by him as d o u b t f u l or l o s s , i n which c l a s s i f i c a t i o n s we cannot concur. The f i g u r e f i x e d by t h e Examiner shows an increase of more than $7 $ 000,000 i n f i v e months over t h e Bank's adjusted c a p i t a l s t r u c t u r e as shown by t h e Examiner's f i g u r e s i n t h e next preceding r e p o r t o f examination* Representatives of t h e Bank a r e now engaged i n an e f f o r t t o come t o an understanding w i t h t h e Comptroller* I f t h a t e f f o r t should f a i l and t h e Comptroller should decide t o c e r t i f y t h e f a c t s t o t h e Board of Governors o f t h e F e d e r a l Reserve System, the o f f i c e r s and d i r e c t o r s , confident t h a t t h e y a r e o p e r a t i n g the Bank i n accordance w i t h law and safe and sound banki n g p r a c t i c e , w i l l welcome t h e opportunity t o present t h e m a t t e r b e f o r e t h a t Board 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 y o u r s , (Signed) 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*
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