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L ib r a r y Room 4047 FOR RELEASE UPON DELIVERY 3 fthrarS PR-95-75 (11-17-75) NOV 1 7 1975 FEDERAL DEPOSIT INSURANCE CORPORATION O C E N T R A L IZ A T IO N WHICH PR ESERVES A R E G U LA TO R Y CHOICE: _______ An In term ed ia te P r o p o s a l fo r Bank R egu la tory R e fo rm _______ A d d re s s by I o F rank W ille, C hairm an F e d e ra l D ep osit In su ran ce C o rp o ra tio n N o v e m b e r 17, 1975 B e fo re the F a ll M eeting o f the A s s o c ia tio n o f R e g is te re d Bank H olding C om panies The B re a k e rs P a lm B each, F lo rid a i FEDERAL DEPOSIT INSURANCE CORPORATION, 550 Seventeenth St. N.W., Washington, D. C. 20429 »• 202-389-4221 The Banking C o m m itte e s o f the C o n g re ss se e m p o is e d to begin th e ir f ir s t s e r io u s re v ie w in a lm o st twenty y e a r s of the way in w hich d ep osit in stitu tion s a re regu la ted in this cou n try. The Senate C om m ittee w ill hold h e a rin g s this w eek on S. 2298, a p r o p o s a l Senator P r o x m ir e in trod u ced e a r lie r this fa ll to co n s o lid a te in a new agen cy the re g u la to ry p o w e rs p re s e n tly v e ste d in the th ree existin g F e d e ra l bank re g u la to ry a g e n c ie s , w h ile the le a d e rs h ip o f the H ouse C om m ittee has in d ica ted its intention of holding h e a rin g s next m onth on a w ide range of b a s ic is s u e s , one o f w hich is to co n s o lid a te not m e r e ly the th ree existin g bank a g e n cie s at the F e d e r a l le v e l but a ls o the F e d e r a l H om e L oan Bank B oard and the N ational C red it Union A d m in istra tio n . The secon d p r o p o s a l is a lo g ic a l exten sion o f the f ir s t , when v iew ed in the light o f the A d m in istra tio n ’ s p ro p o s e d F in a n cia l Institutions A c t. The A d m in is tr a tio n 's p r o p o s a ls , as you know, seek to p la ce th rift in stitu tion s g e n e ra lly on a b a s is o f substantial co m p e titiv e equality with c o m m e r c ia l banks; the H ouse p r o p o s a l w ould p la ce in one a g en cy a ll o f the F e d e ra l G o v e rn m e n t's s u p e r v is o r y p o w e rs o v e r fe d e r a lly in su red th rift in stitu tion s as w e ll as fe d e r a lly in su red c o m m e r c ia l banks. T h e re have been so m any p r o p o s a ls o v e r the y e a r s to re s tru ctu re the F e d e ra l bank a g e n c ie s , and so little C o n g re s s io n a l r e s p o n s e , that we m ay a ll be tem pted to r e a c t to th ese m o s t re ce n t p r o p o s a ls with b o re d o m o r in d iffe r e n c e , b o rn of a co n v ictio n that C o n g re ss w ill again be unable to re a ch a m a jo r ity v iew in both H ouses on this co m p le x and c o n t r o v e r s ia l su b je ct. In m y v ie w , this w ould be an ir r e v e r s ib le blunder fo r both d e p osit - 2 - institution s and the a g e n cie s w hich reg u la te th eir a c t iv itie s . W hatever our v iew s on th ese p a r tic u la r p r o p o s a ls , we should r e c o g n iz e that they r e fle c t a grow in g fru s tr a tio n on the p art o f th ose M e m b e rs o f C o n g re ss c lo s e s t to the bank re g u la to ry sce n e , and th eir staff a s s is ta n ts , with what they see and that they a lso r e p re s e n t the en d -p oin t of p ie c e m e a l e ffo r ts to ce n tra liz e the bank re g u la to ry p r o c e s s w hich have in fa ct obtained m a jo r ity v otes in both H ouses o f the C o n g re ss in re ce n t y e a r s . L et m e be m o r e s p e c ific . F o r a lm o st six y e a r s , I have b een the sp ok esm an b e fo r e C o n g r e s sion a l C o m m itte e s f o r one o f the th ree F e d e ra l bank a g e n cie s and I te stifie d on o c c a s io n b e fo r e 1970 as the sp ok esm a n fo r the la r g e s t state banking d epartm en t in the cou n try and f o r the C o n fe re n ce of State Bank S u p e rv is o r s . The su b je ct m a tter o f th ese h e a rin g s has c o v e r e d a w ide sp e ctru m o f banking s u b je c ts , fr o m p ro p o s e d chan ges in F e d e ra l law to exam in ation p r o c e d u r e s , to the c a u se s and co n s e q u e n ce s o f bank fa ilu r e s , to the in te ra g e n cy a d m in is tra tio n o f R egu lation Q, to a p oten tial New Y ork C ity devault. I have co m e away fr o m th ese en cou n ters with s e v e r a l d istin ct im p r e s s io n s as to C on g r e s s io n a l attitude. F ir s t , C om m ittee m e m b e r s understand but n e v e rth e le s s find it a ggravatin g not to be a ble to get fr o m one o ffic ia l s o u r ce a ll the in fo rm a tio n they m a y be seeking as to so m e fa c e t of the A m e r ic a n banking sy s te m . Only a fte r the su b m iss io n s o f th ree sep a ra te F e d e ra l a g e n cie s are an a lyzed fo r s im ila r it ie s and d iffe r e n c e s , co m p a ra b le in fo rm a tio n is a g g r e gated and a llo w a n ce is m ade f o r s t a te -b y -s ta te v a ria tio n s w h ich m ay be r e l e vant d oes a rough a p p rox im a tion e m e r g e . S econ d, C o n g re s s io n a l e ffo r ts to pinpoint o ffic ia l re s p o n s ib ility when things go w rong a re often ex ce e d in g ly d ifficu lt. The p r o c liv it y of g ov ern m en t a g e n cie s to shift the bla m e fo r e r r o r s in judgm ent, unsound p o lic ie s o r c le a r n e g lig e n ce is g re a tly en cou ra g ed by the e x is te n ce of th ree bank a g e n cie s at the F e d e ra l le v e l and m o r e than fifty at the state o r t e r r it o r ia l le v e l, each with d iffe re n t a ssig n m e n ts, c a p a b ilitie s , ju r is d ic tio n and le g a l p o w e r s . T h is in turn fe e d s the p re v a ilin g d is s a tis fa ctio n in C o n g re ss with C o n g r e s s ’ s own a b ility and ca p a city to o v e r s e e the p e r fo r m i ance of E xecu tiv e B ranch a g e n cie s o r the p e rfo rm a n ce of regu lated in d u stries and fu els the C o n g re s s io n a l se a rch fo r m o r e e ffe ctiv e p r o c e d u r e s and co n tr o ls _r e fle c te d in this c a s e by the b e lie f that o v e rsig h t and a ccou n ta b ility w ill be fa r e a s ie r with one c e n tra liz e d bank re g u la to ry a g en cy . T h ird , w hile there is l i p - s e r v i c e paid to the dual banking sy ste m , few C o n g re ssm e n and h ard ly any C om m ittee s ta ffe r s b e lie v e that state regu lation is o r can be as e ffe ctiv e o r as p r o fe s s io n a l as regu la tion at the F e d e ra l le v e l. Even fe w e r understand that having a c h o ic e o f re g u la to rs is the b e st b u ilt-in p ro te ctio n the pu blic and the banking sy ste m have against a hardening of the b u re a u cra tic a r te r ie s at both F e d e ra l and state le v e ls . Instead, th ere is a p re o ccu p a tio n on C ap itol H ill with u n ifo rm ity in reg u la tion , even as to m a tte rs w h ere n eith er the need fo r u n ifo rm ity n or its d e s ir a b ility has been d em on stra ted . Each of th ese fa c t o r s , I am ce rta in , has in flu en ced the support w hich re g u la to ry c o n s o lid a tion is r e c e iv in g am ong m any Banking C om m ittee m e m b e rs and th eir sta ffs. M o r e o v e r , we have seen in re ce n t y e a r s , as I in d ica ted, a siz e a b le n u m ber of F e d e r a l law s w hich have had the e ffe ct of ce n tra lizin g sig n ifica n t a s p e c ts o f the bank r e g u la to ry p r o c e s s . In this re g a rd , I w ould point out that n e a rly a ll re ce n t le g is la tio n in volvin g new re g u la to ry authority o v e r banks d esig n a tes a sin gle a g en cy to w rite the substantive reg u la tion s n e c e s s a ry to im p lem en t that au th ority, w h ile at the sam e tim e req u irin g that a ll th re e ex istin g F e d e ra l bank a g e n cie s e n fo r c e such reg u la tion s with re s p e c t to banks w h ich they exa m in e. Thus, the T ru th -in -L e n d in g A ct p la ce d in the F e d e r a l R e s e r v e B oard so le authority to w rite the reg u la tion s n e c e s s a r y to c a r r y out its p r o v is io n s , even though the C o m p tr o lle r o f the C u rre n cy e n fo r c e s such reg u la tion s as to national banks and the FDIC e n fo r c e s such reg u la tion s as to State n on m em b er in su red banks. The F a ir C re d it B illin g A c t and the Equal C re d it O pportunity A ct, both enacted in 1974, fo llo w e d this sam e p attern , as did th ose p o rtio n s o f the F e d e ra l T ra d e C o m m iss io n Im p rov em en ts A ct a p p rov ed e a r lie r this y e a r w hich deal with "u n fa ir trade p r a c t ic e s " by banks. T o w rite the reg u la tion s n e c e s s a r y under the 1970 C u rre n cy and F o r e ig n T ra n s a ctio n s R eportin g A ct, C o n g re ss again designated a sin gle a g en cy (the T r e a s u r y ), even though e n fo rce m e n t as to in su red banks w as le ft to the th ree F e d e ra l bank a g e n c ie s . S im ila rly , in the S e cu ritie s A cts A m en dm ents of 1975, the SEC w as g iv en authority to p r e s c r ib e substan tiv e reg u la tion s a p p lica b le to banks w hich act as tr a n s fe r agen ts, s e c u r itie s d e p o s ito r ie s o r m u n icip a l s e c u r itie s d e a le r s , w h ile each F e d e r a l banking a g en cy is re q u ire d to e n fo rc e such reg u la tion s as to banks w hich it ex a m in es. In a sligh t m o d ifica tio n , the e ffe c t o f w hich was to m ake the SEC param ount in m a tte rs o f bank d is c lo s u r e , the D e p o sito ry Institutions A m en dm ents A ct a p p ro v e d O c to b e r 28, 1974, r e q u ir e s each F e d e r a l bank a g en cy to fo llo w the - 5 - S E C ’ s lea d on such m a tte rs o r sp e ll out its ju s tifica tio n fo r a d iffe re n t p o sitio n in s o fa r as banks w h ose s e c u r itie s m ust be r e g is te r e d with that agen cy a re c o n c e rn e d . The m o s t ob v iou s and fa r -r e a c h in g d e cis io n to c e n tr a liz e , of c o u r s e , ca m e with the Bank H olding Com pany A ct A m endm ents o f 1970, w hich expanded the c o v e r a g e of the Bank Holding Com pany A ct of 1956 to include a com pan y co n tro llin g only one bank and m aintained e x clu s iv e authority in the F e d e ra l R e s e r v e B oard not m e r e ly fo r the p rom u lg a tion of bank holding com p an y reg u la tion s but a lso fo r the e n fo rce m e n t of such reg u la tion s, ir r e s p e c t iv e o f the agen cy su p erv isin g the lead bank o r the bulk of the a s s e ts in a given bank holding com pan y. A s th ese law s m ake c le a r , a p attern of ce n tra liz a tio n in bank r e g u la tion has been evident e v e r sin ce the 1968 p a ssa g e of the T ru th -in -L e n d in g A ct. T od ay , ce n tra liz a tio n is m o r e the rule than the ex cep tion - - the Bank P r o te c tio n A ct of 1968 being about the only sig n ifica n t exam ple of a re ce n t a ct o f C o n g re s s w hich a ssig n e d rulem aking as w e ll as e n fo rce m e n t p o w e rs equ ally to a ll th ree F e d e ra l bank a g e n c ie s . So I w ould rep eat that taking the cu rre n t co n s o lid a tio n p r o p o s a ls too ligh tly runs the ris k of ign orin g not m e r e ly som e d e e p -s e a te d h o stility in the C o n g re ss to the b a s ic trip a rtite re g u la to ry stru ctu re w hich e x ists at the F e d e ra l le v e l but a lso the s u c c e s s w hich d eterm in ed M e m b e rs o f the C o n g re ss have had, d esp ite the existin g sy ste m , in ce n tra liz in g bank regu lation with a lm o st e v e ry new act o f bank reg u la tion the C o n g re ss p a s s e s . - 6 - M o r e o v e r , th ere a re som e sig n ifica n t a rgu m en ts in fa v o r of a single F e d e r a l bank a g en cy to w hich m o s t o b s e r v e r s w ould s u b s c r ib e - - even those that se e sig n ifica n t d isadvan tages as w e ll. B e sid e s the s im p licity of having on ly one a g en cy a cco u n ta b le to the p u b lic and the C o n g re ss in m a tte rs o f bank reg u la tion , th ese advantages w ould in clu d e : the e co n o m ie s that cou ld be a ch iev e d by reducin g the n u m ber of sep a ra te le g a l, r e s e a r c h , trainin g and oth er units w h ich each o f the th re e e x istin g a g e n cie s m aintains in W ashington, the m o r e e ffic ie n t u se o f s p e c ia liz e d e x a m in e rs and oth er e x p e rts - - com b in ed with adequate c a r e e r p o s s ib ilit ie s to reta in the b e s t q u a lified am ong them , the d iv o r c e of bank su p e rv isio n and exam in ation fr o m the fre q u e n tly co n flictin g g o a ls of m o n e ta ry p o lic y , g r e a te r co o rd in a tio n in the su p e rv isio n o f failing banks along with s p e e d ie r re s o lu tio n o f th eir p r o b le m s , and a m o r e c o m p r e h e n siv e o v e r a ll v ie w of the o p e ra tio n s and ris k e x p o s u re s o f both on e-b a n k and m u lti-b a n k holding co m p a n ie s tog eth er with th e ir v a rio u s nonbank a ffilia te s . In m y te stim o n y on this su b je ct b e fo r e a H ouse S u bcom m ittee la st July, I e x p r e s s e d m y o p p o sitio n , and D ir e c t o r L e M a is t r e 's o p p o sitio n , to the co n s o lid a tio n p r o p o s a ls then pending, " la r g e ly b e ca u se we b e lie v e [th ey ] w ould e lim in a te any m ean in gfu l c h o ic e betw een the re g u la to ry op tion s now a v a ila b le to the n a tio n 's in su re d banks. We b e lie v e that o v e r the y e a r s the banking p u b lic has b en efitted fr o m the fle x ib ilit y in ch a rte rin g and s u p e r v i sion w h ich that c h o ic e en tails and that it should not be lig h tly d is c a r d e d . " We w ent on to say: "Such a co n s o lid a tio n re p r e s e n ts one e x tre m e , h o w e v e r, o f the b ro a d sp e ctru m o f p r o p o s a ls w hich m igh t a p p ro p ria te ly be c o n s id e r e d by the C o n g re ss if it d e te rm in e s that sig n ifica n t - 7 - change should be m ade in the existin g stru ctu re of bank r e g u la tion at the F e d e ra l le v e l. We b e lie v e , fo r ex a m p le, that it m a y be p o s s ib le to a ch ie v e m any of the advantages of g re a te r ce n tra liz a tio n without giving up the m eaningful re g u la to ry c h o ic e to w hich we have r e fe r r e d . "W e have no s p e c ific p r o p o s a l to lay b e fo r e you today that w ou ld, in ou r judgm ent, a c c o m p lis h this in term ed ia te r e s u lt, but we have a sk ed our staff to continue th eir e ffo rts to see if a fe a s ib le and d eta iled p r o p o s a l can be d evelop ed that w ould m e e t ou r two o b je c tiv e s as w e ll as the needs of o th e r le g itim a te re g u la to ry in te r e s ts , such as the fo rm a tio n and im p lem en ta tion of m o n e ta ry p o lic y . * * * "I w ould co n clu d e by stating that the FDIC is not w edded to the existin g bank re g u la to ry stru ctu re . It is quite p r e p a re d to se e its own p o w e rs and r e s p o n s ib ilitie s sig n ifica n tly changed if the C o n g re ss b e lie v e s such changes a re lik e ly to le a d to a m o r e ra tion a l sy ste m o f bank regu la tion in beh alf o f the A m e r ic a n p u b lic. T h is is a co m p le x a re a , h o w e v e r, f o r le g is la tiv e r e fo r m , and I w ould u rg e the g re a te st c a r e and d e lib e ra tio n on the p a rt o f the S u bcom m ittee as it p r o c e e d s ." T h is m orn in g I am p re p a re d to o ffe r such an in term ed ia te p ro p o s a l - - a p r o p o s a l w hich cou ld r e a liz e a sig n ifica n t num ber o f the b e n e fits w hich ought to flo w fr o m a g re a te r ce n tra liz a tio n o f bank re g u la to ry functions at the F e d e r a l le v e l, y et reta in s what I b e lie v e to be the key b en efits o f in n ova tion , s t a te -b y -s t a te d iv e r s ity and p ro te ctio n against b u re a u cra tic rig id ity and in fle x ib ility w h ich flo w fr o m the re g u la to ry c h o ic e p re se n tly a v a ila b le to a lm o st a ll in su red banks. The s p e c ific s of m y p r o p o s a l draw h ea v ily on tw elve y e a r s o f p e rs o n a l e x p e r ie n ce as a bank re g u la to r, the fir s t six at the state le v e l and the la st six in m y p re se n t a ssig n m en t. Unlike a num ber o f oth er v a ria n ts on re g u la to ry co n so lid a tio n that have been advan ced , this one cou ld be e a s ily and q u ick ly im p lem en ted with v e r y little d isru p tion of - ex istin g p e rs o n n e l and p r o c e d u r e s . 8 - It m aintains a s p ir it o f c o n tro lle d co m p e titio n betw een re g u la to ry o ff ic ia ls , th ereb y en cou ra g in g in tern al re v ie w and b e tte r re g u la to ry p e r fo r m a n c e . F in a lly , it has the v irtu e of being s u s ce p tib le to fu rth e r evolu tion in the light o f actu al e x p e r ie n ce with its b e n e fits and d e fic ie n c ie s and in the light o f ongoing d evelop m en ts in the fin a n cia l stru c tu re , such as m o r e in ten siv e co m p e titio n betw een co m m e r c ia l banks and th rifts , m o r e ex ten siv e in tersta te banking and m o r e com p reh en sive d e p o s ito r s e r v ic e through E F T fa c ilit ie s and w ir e tr a n s fe r s y s te m s . B riefly stated, it con tain s th ese e le m e n ts: 1. The O ffic e o f the C o m p tr o lle r of the C u rre n cy w ould be c o n tinued with on ly two sig n ifica n t m o d ific a tio n s in its e x istin g p o w e rs and ju r is d ic t io n . The f ir s t w ould a u th orize the C o m p tr o lle r to a p p rov e o r deny nonbank a cq u isitio n s by on e-b a n k holding co m p a n ie s in a c c o r d a n c e with R egu lation Y § 2 2 5 .4 w h ere the only bank su b sid ia ry o f the holding com pany is a national bank and w ould s im ila r ly p la ce in the C o m p t r o lle r ’ s O ffice full exa m in a tion and s u p e r v is o r y p o w e rs o v e r each such on e-b a n k holding company. The se co n d sig n ifica n t m o d ifica tio n I w ould re co m m e n d w ould be to tra n sfer ju r is d ic t io n o v e r m e r g e r s and s im ila r types o f a cq u isitio n s w h ere the resulting bank is a national bank to the m u lti-m e m b e r b o a rd d e s c r ib e d b elow , 2. The bank exam in ation and s u p e r v is o r y p o w e rs of the F e d e ra l R e s e r v e S ystem and the FDIC dealing with S ta te -c h a rte re d banks w ould be co m b in e d in a new o f f ic e , headed by a sin gle a d m in istra to r , as su ggested by the Hunt C o m m is s io n . T h is o ffic ia l, who w ould s e r v e a f iv e - y e a r te rm - 9 - lik e the C o m p t r o lle r 's , m ight be nam ed the "F e d e r a l S u p e rv iso r of State B anks. " He too should b e a u th orized to a p p rov e o r deny nonbank a cq u isition s by on e-b a n k holding co m p a n ie s in a c c o r d a n c e with R egulation Y § 2 2 5 ,4 w h ere the on ly bank su b sid ia ry of the holding com pan y fa lls within his ju r is d ic tio n (i. e. , w h ere it is S ta te -c h a rte re d ) and to con du ct a ll F e d e ra l exam in ation and s u p e r v is o r y a ctiv itie s with r e s p e c t to such a holding com p an y. J u r is d iction o v e r m e r g e r s and s im ila r types o f a cq u isitio n s w h ere the resu lting bank is a State bank w ould be tr a n s fe r r e d to the m u lti-m e m b e r b o a rd d e s c r ib e d b elow . 3. A fiv e -m e m b e r F e d e ra l Banking B oard w ould be c re a te d , with th ree ex o ffic io m e m b e r s : the C o m p tr o lle r o f the C u rre n cy , the F e d e ra l S u p e rv iso r of State Banks, and a G o v e rn o r of the F e d e ra l R e s e r v e System d esign ated fo r this p u rp o se by the B oard of G o v e r n o r s . The two rem ainin g m e m b e r s w ould be appointed by the P re s id e n t and co n firm e d by the Senate fo r te r m s o f fiv e y e a r s each, one o f w hom the P re sid e n t w ould design ate as C h a irm a n . The p o w e rs of this B oard should be lim ite d to th ose n e c e s s a r y to im p lem en t u n ifo rm national p o lic y in the regu lation o f the n a tion 's banks and should be v e r y c a r e fu lly and s p e c ific a lly detailed by the C o n g re ss in its enabling le g is la tio n . Since I b e lie v e the C o n g re ss has a lre a d y in dicated the d e s ir a b ility o f a u n ifo rm national p o lic y in the follow in g a r e a s , I would a ssu m e that each o f them w ould be a d m in iste re d by the p ro p o s e d F e d e ra l Banking B oard : (i) the F e d e r a l d e p o sit in su ra n ce p ro g ra m , including the p re se n t liqu id ation 10 - and r e c e iv e r s h ip fu n ction s o f the FD IC , the p re se n t fin a n cia l a s s is ta n c e a u th ority of the FDIC with r e s p e c t to banks in d an ger o f c lo s in g , and the p o w e rs o f the FDIC rela tin g to the cu sto d y , c o n tr o l and in v estm en t o f the FDIC tru st fund; (ii) the bank holding com p an y p o w e rs p re s e n tly v e ste d in the F e d e r a l R e s e r v e B o a rd - - oth er than th ose re la te d to on e-b a n k holding co m p a n ie s w hich I w ould a s s ig n to the C o m p tr o lle r o f the C u rre n cy o r the F e d e r a l S u p e rv iso r o f State B anks, i. e. , the p o w e r to a p p rov e o r deny s p e c ific nonbank a cq u isitio n s o f on e-b a n k holding co m p a n ie s in a c c o r d a n c e with R egu lation Y § 2 2 5 ,4 and the re s p o n s ib ility to exam in e and su p e rv ise such o n e-b a n k holding co m p a n ie s and a ll o f th eir a ffilia te s ; (iii) bank a c q u i sition s w hich p re s e n tly fa ll under the Bank M e r g e r A ct; (iv) the p rom u lga tion o f u n ifo rm reg u la tion s a p p lica b le to a ll in su re d banks w hich the C o n g re ss has h e r e t o fo r e a ssig n e d to the F e d e r a l R e s e r v e B o a rd , such reg u la tion s to b e e n fo rc e d in the c a s e of national banks b y the C o m p tr o lle r o f the C u rren cy ❖ / and in the c a s e o f State banks by the F e d e r a l S u p e rv iso r of State Banks; and (v) the c o lle c t io n o f b a s ic fin a n cia l data and oth er e sse n tia l in form a tion fr o m in su re d banks w hich is needed on a u n ifo rm b a s is r e g a r d le s s o f ch a rte r. O b v io u sly , the a v a ila b ility o f a m u lti-m e m b e r B oa rd fo r th ese b a sic p u rp o se s m ight p rom p t the C o n g re ss to re v ie w oth er statutes w hich contem plate * / E xa m p les o f such reg u la tion s in clu d e th ose rela tin g to nonbank a ctiv itie s under the Bank H olding C om pany A ct and th ose p rom u lg a ted o r to be p r o m u l gated under the T ru th -in -L e n d in g A ct, the F a ir C re d it B illin g A ct, the Equal C re d it O pportunity A ct, and the F e d e ra l T ra d e C o m m is s io n Im p rov em en ts Act. 11 trip a r tite ru lem ak in g and e n fo rce m e n t, such as the Bank P r o te c tio n A ct, but in m y v ie w C o n g re ssio n a l additions to the p o w e rs of the F e d e ra l Banking B oard should be s t r ic t ly lim ite d to th ose w h ere the need fo r u n ifo rm ity is ob v iou s and con v in cin g . T o a ssig n a ll m a tte rs of substance to this B oard , even if national u n ifo rm ity is not re q u ire d , w ould only s e rv e to d etra ct fr o m the fle x ib ilit y and v ita lity that is p o s s ib le with sep a ra te national and state banking s y s te m s . 4. The F e d e ra l Banking B oard should have ce rta in p o w e rs of o v e rs ig h t in the exam in ation and su p e rv isio n of in su red b a n k s. My p r o p o s a l con tem p la te s the continued exam in ation o f national banks by the C o m p tro lle r o f the C u rre n cy and the exam in ation of State banks by the F e d e ra l S u p e rv iso r of State Banks in con ju n ction with state banking d epartm en ts. The p ro p o s e d F e d e r a l Banking B oard w ould, h o w e v e r, be a d m in isterin g the d e p o sit in su ra n ce p r o g r a m and it should rou tin ely exam ine a sm a ll p e rce n ta g e of both national and State banks annually in o r d e r to evaluate the quality of the exam in ation r e p o r ts it r e c e iv e s on a re g u la r b a sis fr o m th eir re s p e c tiv e s u p e r v is o r s . F o r this p u rp o se , it w ill need a m o d e st num ber of e x p e rie n ce d and w e lltra in ed e x a m in e rs and support p e rso n n e l w h ose ranks it can supplem ent by te m p o r a r y d eta ils fr o m the O ffic e of the C o m p tro lle r and the o ffic e o f the F e d e ra l S u p e rv iso r of State Banks. The B oard should a lso have the p o w e r to sy n ch ro n iz e exam in ation s o f a ll bank s u b sid ia rie s and a ffilia te s o f m u lt ibank holding co m p a n ie s, even though the actual bank exam ination w ork is p e r fo r m e d by the C o m p tr o lle r o f the C u rre n cy and the F e d e ra l S u p e rv iso r - o f State B an ks. 12 - In addition , the B oard should have fu ll authority to c o ord in a te , sy n ch ro n iz e and su p e rv is e the w orkou t o f sy stem w id e p r o b le m s in m u lti-b a n k holding co m p a n ie s . 5. The F e d e r a l Banking B oa rd should m aintain c lo s e w orking re la tio n sh ip s with the F e d e r a l R e s e r v e S ystem as the n a tio n 's ce n tra l bank. T h e se re la tio n sh ip s a re lik e ly to be m u lti-fa c e te d in v ie w o f the F e d e ra l R e s e r v e 's r o le as "le n d e r o f la s t r e s o r t , " fo rm u la to r o f m o n e ta ry p o lic y and the n a tio n 's re p re se n ta tiv e am ong ce n tra l banks o f the w o r ld . T his is one re a so n why the F e d e r a l Banking B oard I am p ro p o s in g has am ong its m e m b e r s a G o v e rn o r o f the F e d e r a l R e s e r v e B o a rd , but m o r e e x p licit rela tio n sh ip s w ill be n e c e s s a r y . The F e d e ra l R e s e r v e S ystem should be a u th orize d , f o r e x a m p le, to continue to c o lle c t fr o m a ll m e m b e r banks the in form a tio n n e c e s s a r y fo r the fo rm u la tio n and im p lem en ta tion of m o n eta ry p o lic y , w h ile the F e d e r a l Banking B oa rd w ould be ch a rg ed with the duty to d e v e lo p , c o m p ile and tra n sm it any oth er in fo rm a tio n on the banking sy ste m w h ich the F e d e r a l R e s e r v e n eed s in the fo rm u la tio n o f m o n e ta ry p o lic y o r in its o v e r s e a s re la tio n s . The F e d e r a l R e s e r v e S y stem should have re g u la r input into the d e c is io n s o f the C o m p tr o lle r o f the C u rre n cy , the F e d e ra l S u p e rv is o r o f State Banks and the F e d e ra l Banking B oard with r e s p e c t to the a ctiv itie s o f fo r e ig n banks and th eir a ffilia te s in this cou n try as w e ll as the a ctiv itie s o f U. S. banks o v e r s e a s . E m e r g e n cy b o rro w in g s fr o m the F e d e ra l R e s e r v e d iscou n t w indow should be a v a ila b le to m e m b e r and n on m e m b e r banks a lik e upon c e r t ific a t io n by the F e d e ra l Banking B oard that they a r e in d an ger o f fa ilin g and that such a s s is ta n c e is n e c e s s a r y f o r a 13 - te m p o r a r y p e r io d until a m e r g e r , a r e c e iv e r s h ip sale o r som e oth er o r d e r ly re so lu tio n o f the bank’ s p r o b le m s is a rra n g e d . The F e d e ra l Banking B oard , in turn, should be a u th orized to guarantee the repaym ent o f such b o rro w in g s to the F e d e ra l R e s e r v e S ystem out o f the r e s o u r c e s of the F e d e ra l d e p o sit */ in su ra n ce fund w h ich the F e d e ra l Banking B oard w ill be a d m in iste rin g . The F e d e r a l Banking B oard should a lso be re q u ire d by law to keep the F e d e ra l R e s e r v e S ystem fu lly in fo rm e d with u p -to -d a te in form a tion as to the fin a n cia l con d ition o f a ll such banks engaged in e m e rg e n cy b o rro w in g fr o m the F e d e ra l R e s e r v e ’ s d iscou n t w indow . T h ese s p e cia l p r o v is io n s w ould not a ffe c t oth er types o f b o rro w in g by m e m b e r banks fr o m the d is count w indow , 6. The F e d e r a l Banking B oard should pay a ll c o s ts of exam in ation and s u p e rv isio n in c u rre d by the C o m p tro lle r o f the C u rre n cy and the F e d e ra l S u p e rv iso r o f State Banks and should have fu rth er authority to d efra y the ex p en ses o f q u a lified state banking d epartm ents w hich take o v e r by co n tra ct any o f the exam in ation o r s u p e r v is o r y functions of the F e d e ra l S u p e rv iso r of State B anks. T h ese ex p en ses can be re a d ily a b so rb e d , without the a p p r o p r ia tion o f tax rev en u es ra ise d fr o m the g e n e ra l p u b lic, in the g r o s s annual in c o m e * / The authority to guarantee such e m e rg e n cy b o rro w in g s fr o m the F e d e ra l R e s e r v e m ay m ake an in c r e a s e d e s ira b le in the am ount, p re se n tly $3 b illio n , w h ich the FDIC (and the p ro p o s e d F e d e ra l Banking B oard in the future) can draw fr o m the United States T r e a s u r y on dejnand, o v e r and above the a s s e ts a v a ila b le in the F e d e ra l d ep osit in su ra n ce fund. - 14 - d e riv e d by the F e d e r a l Banking B oard fr o m F e d e r a l d e p o sit in su ra n ce p re m iu m s paid each y e a r by the n a tion ’ s in su re d banks and f r o m the in v e s t m ent in c o m e o f the F e d e r a l d e p o sit in su ra n ce fund a ccu m u lated sin ce 1934* It is o b v io u s that this p r o p o s a l has two b a s ic fe a tu r e s . One attem pts to a cco m m o d a te the dem ands fo r g r e a te r ce n tra liz a tiq n at the F e d e ra l le v e l with the tra d itio n s and p oten tia ls o f our ex istin g sy ste m o f Rational and state banks* The oth er re m o v e s the F e d e r a l R e s e r v e B oa rd fr o m d a y -to -d a y d e c is io n -m a k in g in m a tte rs o f banking reg u la tion and su p e rv isio n when its p r in c ip a l jo b is and w ill no doubt rem a in the fo rm u la tio n and im p lem en ta tion o f m o n e ta ry p o lic y . A w o rd about each o f th ese m a tte rs is n e c e s s a r y . O v er the y e a r s , the fa c t that com p etin g banks cou ld be ch a rte re d and reg u la ted under e ith e r F e d e ra l o r state law has re su lte d in sig n ifica n t b en e fits to the A m e r ic a n p u b lic b y way o f fin a n cia l s e r v ic e and co n v e n ie n ce . F o r q u a lifie d p e o p le seeking to enter the banking b u s in e s s , a tu rn -d ow n by the C o m p tr o lle r o r the lo c a l State S u p e rv is o r w as not n e c e s s a r ily the end o f the lin e . Many banks w hich have su rv iv e d and p r o s p e r e d w ould not be in b u sin e ss today if an a lte rn a tiv e m ean s o f entry had not been p o s s ib le in itia lly . T h is is on ly one e x a m p le, but p erh a p s the c le a r e s t , o f how pu b lic co n v e n ie n ce and n eed s can be s e rv e d d esp ite an in itia l denial by a d ifferen t r e g u la to r. A lthough m any innovations in banking s e r v ic e sin ce I960 have been e n cou ra g ed by ru lin g s o f s u c c e s s iv e national bank a u th o ritie s, only to 15 - be a u th orized th e re a fte r by state s u p e r v is o r s o r state le g is la tu r e s fo r S ta te -c h a rte re d banks, it w ould be w e ll to re m e m b e r that the fir s t b ra n ch e s w ere esta b lish e d by State banks acting under state au thority, the fir s t re a l estate loan s w e r e m ade by State banks and State banks w e re the ones fir s t a u th orized to o ffe r fid u c ia r y s e r v ic e s to th eir c u s to m e r s . M o r e o v e r , one cannot d is r e g a r d cu r re n t state e ffo r ts in the a rea of e le c tr o n ic funds tr a n s fe r , co n s u m e r p ro te ctio n and fin a n cia l r e fo r m . In this la st re g a rd , I think it h igh ly sig n ifica n t that M aine has a lrea d y im p lem en ted the e sse n tia l elem en ts o f the r e fo r m s p ro p o s e d by the Hunt C o m m iss io n and contained in the A d m in is tr a tio n 's p ro p o s e d F in a n cia l Institutions A ct. Som e banking innovations sp rea d only fr o m one state sy ste m to another, freq u en tly with v a ria tion s su g g ested by e x p e r ie n ce o r a d iffe re n t banking environ m en t. When it fu n ction s p r o p e r ly , the dual banking sy ste m is both p r o -c o n s u m e r , in the sen se that it fo s t e r s the in trod u ction o f s e r v ic e s bank cu s to m e r s need o r d e s ir e , and p r o -c o m p e t it iv e , in the sen se that a lib e r a l p o lic y in one sy ste m with r e s p e c t to new c h a r te r s , new b ra n ch es o r new s e r v ic e s can p erm an en tly d isru p t a co n fo rta b le status quo in a given s e r v ic e a rea with ob v iou s b en e fits to lo c a l bank c u s to m e r s . A p r o p e r ly functioning dual banking sy ste m is a lso a sig n ifica n t p ro te ctio n again st u n rea son a b le, in fle x ib le o r a r b itr a r y re g u la to ry con d u ct, as is volu n ta ry m e m b e rs h ip in the F e d e ra l R e s e rv e S ystem . Without new id e a s, p e r s is te n tly a pp lied , nurtured and a b so rb e d , any b u re a u c ra cy can go through an o s s ific a tio n p r o c e s s ju st lik e the p e tr ifie d fo r e s t s that long - ago stopped p rod u cin g t r e e s . 16 - T h is h a sn 't happened in bank reg u la tion , o r at le a s t not fo r lon g , la r g e ly b e ca u se the num ber of re g u la to rs is so la rg e and the p o s s ib ilit y o f sw itching re g u la to rs is so w id ely r e c o g n iz e d that new id e a s , so o n e r o r la te r , w ill have to be c o n s id e r e d by even the m o s t resista n t o f re g u la to ry a u th o ritie s. C om p etition am ong bank re g u la to r s , in oth er w ord s, can be a healthy thing if it le a d s to b e tte r exam ining tech n iq u es, b e tte r adm in is tr a tiv e p r o c e d u r e s , im p r o v e d fin a n cia l s e r v ic e s fo r the p u b lic, o r a m o r e co m p e titiv e banking en voron m en t. A c c o r d in g ly , I b e lie v e our sy ste m o f national and State banks, se p a ra te ly ch a rte re d and reg u la ted , is w orth p r e s e r v in g . T h is a ccou n ts fo r the p ro m in e n ce I w ould continue to g iv e to the O ffic e o f the C o m p tr o lle r and fo r the r o le I w ould e n v isa g e fo r the p r o p o s e d F e d e r a l S u p e rv iso r o f State Banks v i s - a - v i s state banking d ep a rtm en ts. W hile the C o m p t r o lle r 's O ffice has been on the d e fe n siv e in the past two y e a r s b e ca u s e o f the w id e ly p u b li c iz e d fa ilu r e s and n ea r fa ilu r e s o f la r g e national banks, n u m erou s r e fo r m s have b een instituted and th ere se e m s now to b e a g e n e ra l a le rtn e s s to p ro b le m situ ation s and a d eterm in a tion to d eal with them fo r c e fu lly that augurs w e ll fo r the fu tu re . Many state banking departm en ts continue to be plagued by lo w sa la r ie s , inadequate n u m b ers o f e x p e r ie n ce d e x a m in e rs and underfunding g en era lly , but the nu m ber o f d epartm en ts ca p a b le of taking o v e r a sig n ifica n t p o rtio n of the state bank exam in ation and s u p e r v is o r y loa d now supplied by F e d e ra l R e s e r v e and FDIC p e rs o n n e l cou ld be su bstan tially in c r e a s e d with F e d e r a l funding fr o m the in co m e stre a m o f the FDIC as con tem p lated by m y p r o p o s a l. 17 - The co n s o lid a tio n p r o p o s a ls now pending in the C o n g re ss a ll se e m to c o n tem p la te the e x a ct sam e trea tm en t o f national and State banks at the F e d e r a l le v e l, an h o m o g e n iza tio n w hich in m y v iew w ould, o v e r tim e , d e s tro y the v ita lity o f the dual banking sy ste m . I think it im p e r a tiv e ,h o w e v e r , that the insurin g a g en cy , w hich in m y p r o p o s a l is the F e d e r a l Banking B oard , should have the p o w e r to s p o tch e ck by actu a l exam in ation each y e a r of a sm a ll p e rce n ta g e of State and n ational banks. T h is w ill enable the B oard to m o n ito r the quality of the exam in ation r e p o r ts it r e c e iv e s on a re g u la r b a sis fr o m the C o m p t r o lle r 's O ffic e , fr o m the F e d e r a l S u p e rv iso r of State Banks and co n ce iv a b ly fr o m q u a lifie d state banking d epartm ents in states w h ere the F e d e ra l S u p e rv iso r o f State Banks has w ithdraw n, in w h ole o r in p art, fr o m the exam in ation and su p e rv isio n o f State banks. T his e x p licit exam in ation p ow er should help keep both national bank and State bank exam ining f o r c e s on th eir to e s and should p r o v id e an additional in cen tiv e beyond the dual sy ste m it s e lf to keep the im m ed ia te s u p e r v is o r s o f both types o f banks fu lly re s p o n s iv e to new d e v e lo p m en ts in banking and to em erg in g p u b lic n e e d s. M o r e o v e r , I w ould en v ision that when sig n ifica n t in a d eq u a cies a re found in the a v a ila b le s u p e r v is o r y t o o ls , the F e d e r a l Banking B oa rd w ould con v ey to the C o n g re ss and o th e rw ise m ake p u b lic its v iew s and re co m m e n d a tio n s. T he r e m o v a l o f the F e d e ra l R e s e r v e B oard fr o m d a y -t o -d a y d e c is io n m aking in m a tte rs o f banking regu la tion and su p e rv isio n is o v e rd u e . In that r e g a r d , I sh a re the v ie w e x p r e s s e d by fo r m e r V ice C hairm an R o b e rts o n - 18 - a lm o s t ten y e a r s a g o, and e ch o e d by G o v e rn o r B u ch er e a r lie r this y e a r , that ’ ’S u p e rv isio n is too im p orta n t a function in it s e lf to be the F e d e ra l R e s e r v e ’ s p a r t-t im e jo b , ” If that w as tru e p r io r to the enactm ent o f the 1970 Bank H olding C om pany A ct A m en dm en ts and the v a rio u s ’ ’co n s u m e r p r o t e c tio n " la w s the B oa rd is now a d m in iste rin g , it is even m o r e p e r s u a siv e tod a y. T he b a s ic p r o b le m , o f c o u r s e , is that w h ere the im plem en ta tion o f m o n e ta ry p o lic y g o a ls is co m b in e d with bank reg u la tion and su p erv ision , the f o r m e r w ill alw ays be v iew ed as m o r e im p orta n t than the la tter and the tem p ta tion o r threat is e v e r p re s e n t to u se the p o w e rs o f reg u la tion and su p e rv is io n to rew a rd banks fo r th e ir co o p e ra tio n o r to p e n a liz e banks fo r th e ir la ck o f c o o p e r a tio n with the B o a r d ’ s m o s t re ce n t v ie w o f its m on etary p o lic y g o a ls . S in ce th o se g o a ls change with so m e fre q u e n c y , the lik elih ood o f a co n s is te n t, evenhanded a p p roa ch to m a tte rs o f bank reg u la tion and s u p e rv isio n o v e r any length o f tim e is v e r y m u ch in doubt. W h ereas p r io r to 1970, this w as a s p e c ia l c o n c e r n only of la r g e State m e m b e r banks which the F e d e r a l R e s e r v e S y stem a ctu a lly exam in ed o r o f m e m b e r banks fo r c e d to the d iscou n t w indow , it is now the c o n c e r n o f e v e r y hank in a holding com p an y sy ste m . A m a jo r ity o f the p re s e n t B oa rd of G o v e rn o rs has stated that "N ow , m o r e than e v e r b e fo r e . . . " the n a tio n 's ce n tra l bank "n e e d s to be in v o lv e d in the p r o c e s s o f bank re g u la tio n and s u p e r v is io n " sin ce "th e F e d 's k ey r o le s as m o n e ta ry p o lic y -m a k e r and as le n d e r of la st r e s o r t re a ch into - 19 - t e r r it o r y con d ition ed by p re v a ilin g bank s u p e rv is o r y and re g u la to ry p o lic ie s . E ach o f th ose sets o f pu b lic p o lic ie s a ffe cts the e ffe ctiv e n e s s o f the oth er. */ T h eir c lo s e co o rd in a tio n is m uch to be d e s i r e d .” The p r o p o s a l I am m aking r e c o g n iz e s the need fo r c lo s e co o rd in a tio n , but it d oes not co n ce d e the n e c e s s it y f o r m o n e ta ry p o lic y p u rp o se s o f d a y -to -d a y in v olv em en t by the B oard o f G o v e rn o rs in bank exam in ation , bank holding com pany d e cis io n s o r the im p lem en ta tion o f nu m erou s "c o n s u m e r p r o te c tio n ” la w s. So fa r as I am a w a re, m y v ie w o f th ese m a tters is shared by m o s t kn ow ledgeable o b s e r v e r s ou tsid e the S y stem and by quite a few within it. W ithout ela b ora tin g in d eta il, w hich I w ill save fo r C o n g re ssio n a l testim on y , I b e lie v e that m y p r o p o s a l a lso d eals e ffe c tiv e ly with the follow in g p r o b le m s o f bank reg u la tion at the F e d e ra l le v e l: -- It p r o v id e s a m o r e lo g ic a l re g u la to ry fra m e w o rk fo r dealing with the expansion and soundness o f on e-b a n k holding co m p a n ie s, a holding com pany grou p w h ich is lik e ly to in c r e a s e sig n ifica n tly in num ber and im p o rta n ce as m o r e and m o r e states m o v e to fu ll statew ide bra n ch in g. -- It ce n te r s in a m u lti-m e m b e r b o a rd w h ere the F e d e ra l re g u la to rs o f national and State banks can both be h ea rd fu ll r e s p o n s ib ility fo r the d evelop m en t and regu la tion o f m u lti-b a n k holding co m p a n ie s and fo r prom u lgatin g the p e r m is s ib le nonbank a ctiv itie s of a ll bank holding co m p a n ie s. * / July 20, 1975, testim on y o f G o v e rn o r H olland b e fo r e the Su bcom m ittee on F in a n cia l In stitu tion s, S u p erv ision , R egulation and Insurance of the H ouse Banking, C u rre n cy and H ousing C om m ittee. - -- 20 - It c e n te rs in the sam e m u lti-m e m b e r b o a rd r e s p o n s ib ility f o r d evelop in g u n ifo rm standards to g o v e rn the a cq u isitio n o f two o r m o r e in su red banks, r e g a r d le s s o f the te ch n ica l fo r m o f the a cq u isitio n and r e g a r d le s s o f the ch a rte r status o f the re su ltin g bank. It c r e a t e s a b e tte r m e ch a n is m than e x ists today fo r the total co o rd in a tio n o f re g u la to ry e ffo r ts to r e s o lv e the p r o b le m s o f fa ilin g banks, including a lim ite d p o w e r in the p r o p o s e d F e d e ra l Banking B oa rd to o v e r s e e the exam in ation quality o f the C o m p t r o lle r 's O ffic e and the o ffic e o f the F e d e ra l S u p e rv iso r of State B anks. *7 The p r o p o s a l d o e s not attem pt to r e s o lv e so m e im p orta n t, but cu r re n tly p e r ip h e r a l, is s u e s in bank reg u la tion today, such as (i) w hether the p o w e r to set d e p o sit ra te c e ilin g s should continue to r e s id e in th ree d iffe re n t F e d e r a l a g e n cie s o r should be t r a n s fe r r e d e x c lu s iv e ly to the F e d e ra l R e s e r v e as the n a tio n 's ce n tra l bank; o r (ii) w hether the co n ce p t o f " m e m b e r sh ip " in the F e d e r a l R e s e r v e S y stem should be re p la ce d by u n ifo rm r e s e r v e s and equal a c c e s s to F e d e r a l R e s e r v e f a c ilit ie s ; o r (iii) w h eth er in due c o u r s e the re g u la to ry stru ctu re and in su ra n ce p r o g r a m s fo r savings and loan a s s o cia tio n s and c r e d it unions should be m e ld e d into the p r o p o s e d F e d e r a l Banking S e v e ra l oth er a s p e cts o f m y p r o p o s a l w ould a ls o c e n tr a liz e and im p ro v e the handling o f fa ilin g banks. T h e se in clu d e the ce n tra liz a tio n within the F e d e r a l Banking B oa rd o f (1) the p re se n t authority o f the FDIC to p ro v id e fin a n cia l a s s is ta n c e to fa ilin g banks; (2) the authority to c e r t ify to the F e d e ra l R e s e r v e S y stem the need f o r e m e rg e n cy d iscou n t w indow b o rro w in g , the m o n ito rin g o f banks in that situation, and the authority to guarantee to the F e d e r a l R e s e r v e S ystem that such e m e rg e n cy b o rro w in g s w ill be rep a id ; and (3) bank m e r g e r d e c is io n s and d e c is io n s on m u lti-b a n k holding com p an y a cq u isitio n s w h ich a re so m e tim e s e s s e n tia l f o r the re so lu tio n o f a fa ilin g bank p r o b le m . - B oa rd . 21 - M y p r o p o s a l a ssu m e s that th ese m a tte rs w ill rem a in te m p o r a r ily as they a r e , pending m o r e d eta iled and co n ce n tra te d study of the in t e r re la tio n sh ip s w h ich w ould be changed if C o n g re ss m o v e s away fr o m the ex istin g o r d e r in any one o f th ese a r e a s . I b e lie v e , h o w e v e r , that m y p r o p o s a l w ould b e co m p a tib le with and cou ld be adju sted to m o s t o f the solu tion s w hich have b een o ffe r e d on th ese c o n t r o v e r s ia l m a tte r s . In that se n s e , the re g u la to ry re stru ctu rin g I am p ro p o s in g should be c o n s id e r e d an in te rim stru ctu re , su s ce p tib le o f fu rth er evolu tion in the light o f e x p e r ie n ce and future d evelop m en ts in fin a n cia l com p e titio n and s e r v ic e . If th rift institu tion s r e c e iv e en la rg ed p o w e rs both on the a s s e t and lia b ility sid e and the p r o te c tio n s they p re se n tly en joy , lik e the R egu lation Q d iffe re n tia l, a re in tim e re m o v e d , they should be su b ject to reg u la tion and r e s e r v e re q u ire m e n ts s im ila r to th ose im p o se d on c o m m e r c ia l banks, If E F T d evelop m en ts o r the in te rsta te a ctiv itie s o f banks and bank holding co m p a n ie s p re se n t d ifficu lt o r in so lu b le p r o b le m s of reg u la tion f o r state banking d ep a rtm en ts, I w ould ex p ect a sig n ifica n t shift o f authority o v e r la r g e State banks to take p la ce as betw een state s u p e r v is o r s and the F e d e r a l S u p e rv iso r o f State B anks; at the sam e tim e , the nationw ide ju r is d ic t io n and ca p a b ilitie s o f the C o m p t r o lle r ’ s O ffice m ay b e c o m e an in c r e a s in g ly p o w e rfu l in ce n tiv e fo r such banks to a ssu m e a national c h a r te r . None o f us can be cla irv o y a n t about the future a ctiv itie s o f d e p osit in stitu tion s in this cou n try ten, fifte e n o r twenty y e a r s h e n ce . - The p a ce o f change is a c c e le r a tin g , in m y judgm ent, not slow ing down. What we need - 22 - is a re g u la to ry stru ctu re that w o rk s w e ll under a w ide v a rie ty of c ir c u m sta n ce s, that re m a in s r e c e p tiv e to new id e a s, that can endure s tr e s s and still stay fle x ib le in the ligh t o f the new te ch n o lo g y w hich is constantly en largin g the re a ch o f ou r fin a n cia l in stitu tion s. today m a y , I h op e, be a con trib u tion to that end. The p r o p o s a l I am making
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