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_ }:JlJ M
DIGEST·
COMPTROLLER GENERAL. OF THE UNITED STATES
WASHINGTON, C.C. 20548
~~
APR 2 2 1977
(,-ll 4ij 31
L-118535
~d
:~-168904
The Bonorabla.Ject Brooke
Ch<!irn~n .. C:c~ruittee on Gcve.rmr1ent
Op13ration.t: ·
of
fou~~
.
,
~epre~entatives
~e~r
Hr, Cheirman: ·
on FJ.
Your. li?.:t:ter dat<E-d }i~rch l·L l'n7. requested ci.a: cc!P:r:£">r>tf'
t.:. >1$-''1~. a. bi 11 to ;;;irovide tb~ Comptroller Ci<::!HHal ~d tn
exPlicit ?.titbority to au~Ut th€" bo.nk n~ip<*rvi.serr !unctions
of the
!\.
I
Fed~r~l.
cc.rporatic~.
ieserve System, the federel Depo~it Insurance
i
l!no the GfHctt of tht: Com~?trc1ler of. the CD:rft·ncv. (
As you are a~are there have be~n weny bills introduce~
i r. the Congress in re<cent yeei.rs tc provi.d~ for auci ts by our:
Office of the \three ?\:'de·ral bank r:eryul~tory t'J(~~nciN3. w~
telievr:- thet it is important th.at ~n~ bi.11 fir.ally ~nacted
by the Con9·r~es eont~.in minbit.n:;i r:e.str iction.s on ot<r ,)c•;H t
.?ruthority ..
W~. tf}St iti~d en Ha::ch .2., 1977, bet ore YOllL Subcoro:rrii tt~!l:
en Comrnorce * Consmner, fPnd MotH~t:ary Aft~irs · cri t:. .. ii. 2l 7t. l!
bill which tdl.Oo woul(! !')rovide
\·lith. ~xnli'cit ~u~Ht ~1Jthoritv
over the- bank. r~9ul:atory c:(;r~nci&s.. . He (~xpu~ssa:io concern wi tb ·
the restrictions on <..~ur <.'lt1di.t .r.Authority th~t ·w~te include-o in
that bill .. ,;pecifi~ctlly tha eixclt..1sion or. C?~n Ha·rket Comw-ittec
t.r nns$,cti ons .... A c.of~Y cf .Ass,i &t.a:nt Coniptrcl ler · Gen0.r al Pi{)r n~, • B
stat.ement is en·close<l.
·
ua
E .. R.. 4.469' contains evetn :more {'estrictione th~n H.. t::. Zl/5
and. in eff(lc.t .. nH!;V not pei:mit U5 to review even the mrNt-s
i11cluded it'l out re.~ently · complet~d study .. · ·We! 4' therv for~,
hcive se.-r ioue res"!rvat.ions with fl.~.. 4 469. Our co'.i?'ne.nte
rngtrding ept:~if ie ·section El of the bill f:cllc.w.
Areas
. _. . . .,_ . . . ., o·f audit
~-·-.-..1. _,.,r~• ··~·
lt if.~ our vie·w that tbe scoP(· of GAO's ·audit authoritv
Sh(~uld extend not. only .to thOSi:! ~ctivities that ere dir~ct'.iv
.......
832
B-ll4Sll
B-118535
B-168904
and clearly related to the bank supervisory process but also
to all other activi t iea of the three bankinq ~o.encies. 'l'he
language of ·subseetion (6) Cl) could create problems in oet~r
mining what subjects "re .. directly and cl~arly related to tne
bank supervisory process..... would GAO be permi tt~cl to auci t
such areas as (l) the agency's tiupervision of bank holding
companies. Edge Act and •aqreetnent" corporations, (2) the
agency's use of the Qdiscount window• as lGnder of lest
resort. (3) the income ~nd expenses of the regulmtory
agencies. (4) the insurance fund~ {5} the agency's handling
cf structural chan~es in the- banking system sueb as the
o.pr.rov~l and ciisapprov61 of applications for ne~ branches
and bank merqers. or ( 6) the handling of bank failures? v;Je
believe that the language of B.R* 446S, if enacted, could
create serious disagreements bet we-en GAG and the oank regulatory agencies as to ~hat areas we were authori~ed to revi~~.
we might be pr.eclu<led from rev.i~wing ;;;. nt;lnber of 1.Jt.porte'fnt
~reas in bank supervision. Accordingly. ~e sug?est that the
langu~qe ct subsection (cl)(l) be changed t-0 ~•Jthcri.ze GJ;,,O
'audits Of all activities Cf the b~.nking _a9encie.s .. Any desired
exceptions to t~is broad authority shoulcl be explicitly
stated ..
Access
to agency recorde
·- -...-----·--- .... _,. .. ,
···""·--.-..
-·-...-~-·-·-·--------,.
!ifU~ !)ave_
no
objections to the first two sentences of
subsection {d)(2).
¥.:E-!9.~~.~£~L. ~!... !~. !.!.~-~-~
he believe tbat it is desirable to authorize tiie Cor.::p-
troller General to ecnecule audits
~s
he deems aprrro9riate.
We believe th et suc.h author izat.:ion woulc per-mi t our C!fi c~
to be raore responsive to the needs of the Congress Qno its
comroi ttees. It would a.1.so permit our Ctfice more .tlP. :xitili tv
in alloca.tinq our - resoure-es~
.,
~~ ~!~9~~~!1~~--~!. t1l_?:.~.-~E~£!:~.!:9.~ !:Y~~l.!lE.!±_;~ !_£.~
~ ~--~~! 2~.L. ~P.!!~£-~..~ ~~~L ..§!;.?.!: ~,~ ~- .9. f _. !'..9.£. ~. ~2-~E!' E~
We have no spe-cific
obj~ction
tc~
Cetails crln best
b~
vor!r.ed out between
arrengei1t~nts set
beli~ve tt'ist su<:h
the
forth in subsection (d){2}1 how€ver. we
CAO anc
the .;iaencies
833
B-114·831
B-118535
B-1689-04.
on an informal basis
ie our normal procedure and thus are
a5
r.ot a leqislati ve ne-cessi ty.
~~.~~~·~£~!.~9.-.f!.~E~E~~~--':~~.~!~~.~~ST}.~--9J_~.~~!:~~.
~;-e believe the ptohibition against th~ GAC cor.ductin<;
senar~t~ exa1:dnetions of banks to evaluate the accuracv of
the examiner •e f~ctual finciinqs would hinder our. abilfty to
fully evaluate the o.dequacy of aq~ncie~' supervision of banks.
hhile \rle do not expect to make croc.d use of authority to make
such examinations or even to QCS~rve the a.qiencv• s ex.]rrdnation
of banks, some testing and verification cf-the-e;rnmi11er's
factual. findings "1ould be a neceoaary step to fully evaluat-
ir.q. the adeC,u.?!cy of the ,agencies• be:r:ik examination p.r.og.raJtj.
Our Office has
effective
Wf)YS
t~k.en the 'f?Oeition U1at one cf the· most
to instJre that our rep-0rts are- fair. complete.
ano objective is to obtain advance
revi~ws
and comments by
persons or by officials of organizQ'ticna whose activities
.?ire discuss.ea in the reports. our ncrnH'l'l oparatin~ procedure
is to e.fford thoge so aff~ctea with a. reanonable or.r)ortunitv
to comroer,t on our reports be fore releasi nq the reP~rts.. ~e believe that the proposed legislative ti.we frames .. tor o.btai!'\ing &dvance review and coror.1.ents ~r-e utmecessn:y .a."1.tl t:hitt
eueh matters c~ best be h~ndle<l on a case-by-ca~ basis
with the
agenci~s.
Identifyinq
., .. ,P
, . _ , , _ _ ,..,
ba~ks a~<l
.,,..r..._..__,1-<••-'o,_ • ...,,.,..,-.,._.....,..._, .. ,..,,,._._
·
bank.customers .
•f""
,._~
.. ,..._,;..
_..,.,.__.....,..~.-...-
... _ , . . . . , _
We ha.ve no objections to the prohibition in f~ubeectiori
(d)(3) against identifying specific banks or. batf~ cuZttomers.
~!~!~.~.~.~.~~~~~~-!-~et~.--~·~-£p.~;
~e eo not agree with the limitations ~t torth in subsection (d)(4) with re9ard to performance audits of the
l'ed•ral Peserve Syste~. Our vitHt>B en such limi t~t.icns ~r€
explained our i~ he-e.r ings on n .B.. 2176 (enclosed statemer4t) ..
- 3 --
B-114831
s-118535
B-168904
In sddi ti on ..
\;.'e
suggest the fol.lcwing t~chnical chang,e.s:
In th~ third sentence of subBection (.e) ( 2) _ change
"very• to •every.•
In subsection (d) ( 4·) (B)
•oeliberations.•
1~e
#
cheng-e •aelive-rations'* to
shall be pleas.ed to discuss this r-tatter further with
you or your staff.
Sincerely yours.
Enclosures
i}
ZVRa:a:m JAi:w.aa~
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B1IS<ixs oJ
croi~.sJ:al~eL bsacqo~q
:!IOI'fiO rn;IT"ilUCO~A .IA~~D
a;t.twA
rnsJa"l8
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s~eagfl la'Isb9~
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