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For release 11:00 a.m.
Eastern Daylight Time
September 19» 1962

Remarks of J. L. Robertson
Member of the Board of Governors
of the
Federal Reserve System
Before the Annual Convention
of the
National Association of Supervisors
of State Banks
Bretton Woods, New Hampshire
September 19, 1962

Too Many Cooks
Recently the New York Times carried an editorial
titled "Too Many Banking Cooks". Naturally, the editorial
impressed me as being unusually good, even for the Times,
because it reported favorably on my suggestion for stream­
lining federal bank supervision. I made the suggestion
initially with some trepidation. It was not that I had
any doubts about the merits of the case, but there are al­
ways those who think they have a vested interest in the
status quo, and I had no way of knowing how many people
would be deeply offended by a suggestion for a radical
change. I have been surprised and gratified to find that
the response to the proposal has been overwhelmingly favor­
In supporting the proposal, the New York Times
brought to its readers' attention a fact of banking life
which is only too well known to all of us here. That fact
is that delays, conflict and confusion are inescapable so
long as jurisdiction over the nation's banking system is
divided among so many cooks in Washington. Unfortunately,
recent examples are easy to find of cases in which the fed­
eral bank supervisory agencies have contradicted and over­
ruled each other, made recommendations to other agencies
obviously inconsistent with decisions rendered by them in
their own cases and, in these and other ways, confounded
and exasperated members of the banking community.
Bankers may be consoled by the knowledge that in some
instances they are no more surprised by agency actions and
decisions than are the heads of other agencies. You may re­
member a few weeks ago when the head of one regulatory body
was reported to have expressed "amazement" at a decision ar­
rived at by a sister agency. That is a pretty good reason
in itself for getting the whole family together - under one
Although many of you are familiar with the outlines
of my suggestion to accomplish this, I would like to review
briefly the form of the proposal for a Federal Banking Com­
mission, then comment on a few of the questions which people
have raised regarding it, and finally (I mention this now
so you will be prepared) try to answer any questions that

- 2 -

you may have. After that, I am leaving for South America!
You have read in the newspapers recently about this or that
person fleeing from the United States, under pressure, to
safety in South America, so let me quickly assure you that
this trip was planned long before 1 received the invita­
tion to appear here.
The Federal Banking Commission would be a new agency,
headed by a board of five Commissioners appointed by the
President, with the approval of the Senate, on a staggeredterm basis. The FBC - if I may use that shorthand for the
proposed Federal Banking Commission - would assume all the
bank and bank holding company supervisory powers presently
vested in the Federal Reserve Board, the Federal Deposit
Insurance Corporation, and the Office of the Comptroller
of the Currency. The last two would be completely absorbed
into the new Commission, except that the currency functions
of the Comptroller's Office would be transferred to the Fed­
eral Reserve, where they belong operationally.
The FBC would acquire all the jurisdiction presently
exercised by the existing federal agencies over charters,
branches, mergers, holding companies, fiduciary and foreign
banking activities, as well as disciplinary actions. The
Commission would promulgate all of the regulations which
are now within the province of the three existing agencies,
and it would also interpret and administer the federal bank­
ing laws.
There would be a Director of Insurance and a Director
of Examinations, responsible to the new Commission, and ap­
pointed by it. Both Directors would be career appointees
with indefinite terms of office.
The Director of Insurance would handle the deposit
insurance and related functions now performed by the FDIC.
The Director of Examinations would be in charge of
all examiners. His staff would consist initially of indi­
viduals currently employed by the three existing federal
agencies. He would be obliged to see that every national
bank was effectively examined, that the laws of the land

- 3 -

were obeyed, and Chat the regulations of the Commission
were complied with. He would be authorized to examine
state member and nomnember insured banks when necessary
in the judgment of the FBC, its Insurance Director, or
the Federal Reserve Board - all of whom would have free
access to copies of his examination reports. In serving
the Commission, he would submit to it a report on every
application relating to a charter, branch, merger, or
holding company, he would be expected to represent the
public interest at quasi-judicial proceedings of the Com­
mission, he would report to it unsound banking practices
and violations of law, and he would refer to it questions
calling for interpretation of law.
Exactly four months have passed since I first voiced
this proposal. During the interim many people have enthu­
siastically discussed with me the merits of the plan. They
have agreed that it would add consistency to decisions and
efficiency to operations. It would eliminate overlapping
jurisdictions in the interpretation, administration, and
enforcement of federal banking laws and regulations. It
would bring all bank supervisory and examination personnel
of the federal government together in a single place, where
they would combine their abilities and resources to keep
abreast of and contribute to a growing and healthy dual
banking system. Banks, for their part, would be able to
concentrate their fire, or their requests, as the case
might be, on that one spot. In addition, the FBC would
facilitate the gathering and processing of banking statis­
tics. Its existence would free the Federal Reserve to de­
vote all of its time to the System's primary responsibility monetary policy - which, I can assure you, is a full time
As a matter of mechanics, in case there is need for
clarification, it is contemplated that all members of the
staff of the FDIC and of the Comptroller of the Currency,
as well as those employees of the Federal Reserve System
who are engaged in bank supervisory work, would be auto­
matically transferred to the new agency. From among them
the Commission would select its top staff and proceed to
weld together the three units into an efficient and effective

- 4 -

force, thus eliminating duplication of work, cross-travel,
and all the excessive costs that result therefrom. This
would permit uniformity of federal policy in bank super­
visory work. It would eliminate, for example, the neces­
sity for three different federal agencies to consider the
competitive aspects of each bank merger, although only one
makes the final decision. It would eliminate a situation
in which one agency condones the absorption of exchange
charges and another condemns it. It would provide the ef­
ficiency and effectiveness of one-man administration in
both the examining and insurance functions, and yet assure
to State Bank Supervisors and members of the regulated in­
dustry the right of an appeal to the full Commission in the
case of determinations they deemed unwise, unfair, or ca­
pricious. It would assure that the important functions of
formulating policy, promulgating regulations, and rendering
decisions on merger, holding company, charter, and branch
applications, would be exercised by a group of specialists
sitting in a quasi-judicial capacity.
These specialists would be the members of the new
Commission. They should be men who know the business of
banking, men of integrity, impartiality, and competence,
who will create for the Commission a prestige comparable
to that of the Supreme Court. They will constitute a body
which is above politics - not bipartisan, but nonpartisan even as the Federal Reserve Board and the federal courts are
today. The Commissioners should be men who have the courage
of their convictions; they should be strong, bold, and unvacillating.
At the time I first spoke on this proposal, I sug­
gested that the plan be made the subject of debate, in the
hope that it could be perfected or be supplanted by a bet­
ter plan. Thus far, no one has come forth to accept the
challenge, and I am left with no alternative than to debate
with myself. This is very unsatisfactory, because I may not
fully understand or state the arguments of those who object
to the plan.
The few objections that have been brought to my atten
tion are not the kind into which one can get his teeth. For

- 5 -

example, there are those who prefer the "divide and con­
quer" or, as they call it, the "country store" approach
to bank supervision; those who have indicated preference
for a system that has worked well enough in the past - the
"horse and buggy" approach; those who say they see in it
a threat to the dual banking system through federalization
or an "obvious threat of federal controls" over all banks;
and those who refer to the proposal as "novel and interest­
ing but impractical".
There is no way to deal with emotional arguments for
preserving the old because it is old, except to appeal to
reason. It is my hope that the plan for a single federal
bank supervisory agency will be adopted or rejected on its
merits. But I might comment that when I was a boy on a
ranch near Broken Bow, Nebraska, we went to town twice each
Slimmer - once to see the Custer County Fair, and another
time to attend the Chautauqua. On those occasions we would
hitch up to the spring-wagon the two fastest, longest-winded
animals on the ranch - a spicy mule named Balaam and a sad­
dle horse named John. After the chores were completed early
in the morning, all the ranch hands would pile into the
spring-wagon and head for Broken Bow at high speed, stay
in town long enough to visit the Fair, or the Chautauqua,
and go back to the ranch in time to do the evening chores.
The trip took more than two hours over twisting, hilly roads
that were so rough one had to hold tight to the wagon to keep
from being bounced out. Today, on the new highway, the smooth
trip to town takes fifteen minutes.
I may feel nostalgia when I remember those times and
the old-fashioned ways, but there is no use bemoaning their
passing. Similarly, today's federal bank supervisory set­
up is still in the horse-and-buggy stage. Perhaps we are
nostalgic toward it because that was the pattern that ex­
isted when we were young, but it is outmoded - as outmoded
as Balaam, the mule* Why preserve it? Some may cling for
a while to the "country store" approach if they wish. The
most convincing arguments may not shake them - but time will;
even the most obstinate among us cannot hold up progress for­

- 6 -

I have heard it said that although the proposed
unification of agencies has great merit and is admittedly
superior to the current arrangement, why disturb a system
that is still working pretty well? Let sleeping dogs lie!
The attitude revealed by such an argument can raise one's
hackles, but the argument must be answered rationally, not
emotionally. The simple, honest answer is that a large and
vital area of our national economic well-being is affected.
It always takes effort, sometimes great effort, to over­
come the inertia of an established method. But human ex­
perience proves that the effort is fully repaid by the im­
mediate and future gains. The moment a society stops try­
ing to improve itself, it begins to wither. If man does
not work to make his established institutions better, they
become worse; they never remain the same; the direction is
either forward or backward.
Certainly I do not see the FBC as representing any
kind of threat to the dual banking system. That worry is
very farfetched. The FBC would introduce no additional
tier of federal authority. It would simply amalgamate in
one agency the powers which the federal government now ex­
ercises over banking through multiple agencies - functions
which have been scattered, among three different agencies,
almost by unplanned accident, as our nation developed and
Some state supervisors who have considered this pro­
posal have wondered whether a new Federal Banking Commis­
sion such as I have proposed would be apt to display favor­
itism toward the national banking system to the detriment
of the state banking systems. As a matter of fact, the
state banking systems would then be in a better position
in this respect than they are today, because a federal
agency which has responsibilities with regard to both sys­
tems of banks would be less likely to show favoritism than
one which exercises supervisory functions over a single
system and may seek to advance the interests of that sys­
tem alone. By way of homely analogy, everyone knows that
a father is so careful not to favor one son over another
that he will bend over backward to make sure that each re­
ceives fair and equal treatment. If one were to seek an

- 7 -

example In the realm of government, he need only look at
the Federal Reserve System, which possesses supervisory
powers over both state and national banks. No informed
person has ever challenged the impartiality of the System.
It has not shown favoritism toward one group of banks over
The FBC would make every attempt to remove itself
from state bank supervision as expeditiously as possible.
During an initial period of three years, the FBC would make
its advice and assistance available to the states as they
worked to perfect their own supervisory staffs and proce­
dures. After that, the FBC would examine state banks only
upon state request, or for occasional spot checks, or where
state examinations were inadequate for federal supervisory
purposes. Thus, under the plan I have proposed, there could
be a gradual move toward much more complete supervision of
state banks by state authorities, depending upon whether
they develop staffs that can perform their functions satis­
factorily without the aid of a federal agency. One might
think - and certainly hope - that the adoption of this pro­
posal would spur more of the states to provide the amount
of funds necessary for adequate state bank supervision and
for adequate compensation of examiners.
In this connection, I was told the other day by a
friend that a state banker said his bank paid no attention
to the examinations by state authorities, but relied exclu­
sively on Federal Reserve examinations. This should never
be the case. Each state must see to it that it has a com­
petent bank supervisory staff which is sufficiently manned
and financed to do the job. Under my plan, each state would
continue to have federal assistance with the expectation
that in three years it could develop an adequate staff and
be able to establish to the satisfaction of the Commission
that it could carry on the supervision of its state banks
in a manner that will satisfy also the needs of federal in­
surance and reserve programs and the requirements of federal
Although the proposal for an agency such as the FBC
is untried, the idea is not novel. For more than forty years

- 8 -

various groups and individuals have proposed similar reor­
ganizations. Still the fundamental concept remains modem
and up-to-date. It is designed to meet today's and tomor­
row's increasingly rapid pace and complex nature of busi­
ness and economic activity, which place expanding demands
and stresses on the dual banking system as we know it,
threatening its breakdown under pressure. When any sys­
tem vital to the well-being of our people begins to suffer
from harmful deficiencies, something drastic is likely to
happen - sooner or later. We have the opportunity now to
shore up or rebuild the system before its weaknesses be­
come critical. It would be foolhardy to fail to take ad­
vantage of the opportunity.
Assuming, however, as some seem to have done, that
the proposal for a single federal bank supervisory agency
is novel and interesting, is it, as they assert, impracti­
cal? Just the opposite is true'. The plan would reduce
costs and increase efficiency. Bankers would be in a po­
sition to know precisely what the ground rules are, in or­
der to better plan and regulate their own activities. The
banking industry is entitled to know the "rules of the
game". Once known, bankers will abide by them; but they
must be known, not buried in the midst of numerous press
releases of multiple agencies, not confused by conflicting
positions or decisions, and not be the product of a race
of laxity between "competing" federal agencies. They must
be devoid of political overtones and of interpretations de­
signed to favor one group of banks over another. Under my
proposal bankers will be able to look to one federal super­
visory institution instead of three. Responsibility and
authority at the national level will be centered in one
brightly illuminated goldfish bowl. No longer will it be
appropriate for editorials to point out that there are too
many cooks in federal bank supervision or to look with dis­
taste at the kind of broth they have brewed.
As I indicated earlier, 1 have been heartened by edi­
torials in leading newspapers and periodicals and by numer­
ous letters from financial, economic, and governmental lead­
ers, expressing approval of the proposal that federal ac­
tivities in this field be consolidated in one agency; so

- 9 -

heartened that sometimes I think I can hear the bells toll­
ing the demise of multiple federal bank supervision. But
bells have tolled before for events that have never come
to pass. Much depends on the soundness of the plan, and
much depends on the attitude of your organization towards
it. Consequently, I hope each of you will study it, take
steps to perfect it, and then espouse it in whatever ways
you deem appropriate.
The need for coordination, efficiency, and uniform­
ity of federal bank supervisory policy is such that we
must not follow those whose views are based on the "divide
and conquer" theory. The need is great and the time is
ripe. Continued bickering and inconsistent supervisory
actions among federal authorities can soon lead to a situ­
ation which will call for legislation of a much more dras­
tic type than that which I am advocating, and this might
really jeopardize the continuance of a dual banking system.
Now, since I am here today not so much to sell or
defend an idea as to improve it, I will welcome your ques­
tions as well as any comments or suggestions.