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B U R E A U C R A TS ,

A d d r e s s , by
R O B E R T E. B A R N E T T , C h a i r m a n

Federal Deposit Insurance Corporation

Before the

Western Independent Bankers,~San Francisco, California, March 28, 1977

I would like to take this opportunity to discuss
the importance of people in the bank regulatory
scheme, to comment on various agency
reorganization ideas that recently have been
openly presented and discussed, to comment on
some that have not been openly presented, and to
suggest an idea for reorganization of the federal
banking agencies which, in my opinion, would
benefit the banking system as a whole.
Let me begin by reciting my major premise — as
important as organizational structure is, it pales
when compared with the importance of the
individuals who operate the organization. People
operate the FDIC and the other bank regulatory
agencies. The Corporation is a service organization
which performs well if its individual employees
perform well, and poorly if they perform poorly.
The regulatory system has performed well,
especially in the context of the past few years so
any consolidation of the agencies must be based on
something other than past performance. In my
judgment, any real benefits to be gained from
consolidating the agencies do not outweigh the
harm which such consolidation would cause. The
main reason for this is that any consolidation
would tend toward elimination of the competition
in excellence that exists not only between and
among the federal agencies, but also between and
among the state agencies and the federal agencies.
A t the same time, if a modest reorganization
would result in some benefit and eliminate the
excessive time spent directly and indirectly on the
question of reorganization, I would not only not
oppose it but would work to see it accomplished.
Whatever the case, I think it imperative in the
spirit of Government in the Sunshine that all
major reorganization plans be presented and
reviewed fu lly and openly. As good as the ends
might seem to their sponsors, it is more important
that those ends not be reached incidentally or
accidentally, or w ithout full testimony and
First, with respect to the importance of people
in bank regulation: Over two-thirds of the people
employed by the FDIC are bank examiners who
are examining banks on a daily basis throughout
the country. They are college educated men and
women of different races and backgrounds whose
function is to discover the condition of the banks
they examine. They are professionals as are the
bulk of the other FDIC employees — lawyers,
economists, accountants, systems.analysts,
liquidators, secretaries, etc. The job they do
requires a great deal of subjective judgment,
crucial judgment of d ifficu lt issues which involve

both people and property. To a very great degree
bank examiners are their own bosses with respect'
to any particular assignment they have.
I think we have been lucky over the years, and
particularly in recent years, with respect to the
caliber of people involved in banking supervision.
Presidents have not viewed the banking supervisory
agencies as a convenient dumping ground for
friends in need of dignified but innocuous
employment. We are all familiar w ith allegations
of Congressional and Executive pressure on
presumably independent agencies to hire particular
people. Such pressures have been very rare at the
FDIC, and we have been able to resist them. In
fact, during the 6V2 years I've been with the
Corporation not one person has been hired by the
Corporation because of pressure from either the
Legislative or Executive Branches of Government.
In part, this may be a function of our independence
from the appropriations process for our funding;
more about that later.
I said that we have been lucky with respect to
the caliber of people in the banking agencies. There
are reasons for being concerned that our luck will
not hold indefinitely.
We have, from time-to-time, lost people from
senior positions whose continued presence at the
FDIC would have been extremely valuable.
Fortunately, that doesn't happen often. I am more
concerned, however, about possible attrition at
lower levels of the agencies and
the quality of those who apply for jobs in the
first place. Bank Examiners, by the very nature of
their jobs, have frequent contact with bankers, and
are in a position where bankers can be impressed
by their competence and capabilities. Examiners
frequently receive job offers from banks, and
many of them do join banks. That is not too
distressing, in small numbers, since we are
confident that an ex-examiner will usually be a
good banker. I am concerned, however, that at
some time there may be a great many examiners
making that choice, or that it may be the
particularly able and ambitious of the bank
examiners who see greater opportunities for a
long-run career in banking than in the bank
supervisory agencies.
One of the several factors involved here is
simply the matter of morale. We must consider
the impact on employee morale of discussions
about eliminating or consolidating agencies. We
have had firsthand experience with that problem
at the FDIC. There clearly was an impact on
employee morale involved in our experimentation
with withdrawal from examination in selected
states. Many examiners saw that as a signal that
an FDIC career might become a thing of the past,
and only a considerable amount o f top

management effort could convince the examiners
that in fact it was just an experiment. Had they
not becom e convinced of that, we might have
lost many of our younger examiners.
But morale can be depressed more indirectly. I
amconcerned about the impact from unwarranted
and unjustified aspersions on the integrity,
dedication and competence of employees of the
supervisory agencies. For example, I do not think
that the steady drum of criticism of the
Comptroller's Office in recent years can avoid
having an impact on employee morale in that
organization. Or, take another example — we
recently went through a political campaign in
which many candidates from both parties —
Presidential, Congressional, state office seekers —
campaigned in effect against the career government
employees. That gets to be an old song pretty fast
to a government employee who is working as
honestly and diligently as he or she knows how. It
has to affect adversely their attitude. Far be it from
me to defend every action of every bureaucrat in
Washington or in the field. My only point is that
the success of our program of bank supervision is
heavily dependent on those bureaucrats, and
irresponsible attacks will, in the long-run if not
the short-run, lead the more able of those
bureaucrats to choose another line of work.
Of course, there are other factors leading the
more able to choose another career. The most
obvious is money. We have just gone through a
period of over six years in which senior level
career government employees did not receive any
significant increase in pay. The highest paid civil
service employee of the federal government was
paid at the rate of $35,500 in 1969, received a
$500 raise in 1971, and no further raises of any
kind until 1975.
We have seen the absurd situation in which
employees in the four highest levels of the Civil
Service System receive exactly the same salary.
Let me repeat that so that it is not missed. Not
only was the highest paid civil service employee
of the federal government receiving $39,600 a
year in early 1977, but so did all of the next
lower grade level, GS-17s, who reported to the
GS-18s. And so did the GS-16s, who reported to
the GS-17s. And so did many of the GS-15s, who
reported to the GS-16s. During the last seven
years, therefore, while the cost of living went up
55 percent, the salaries of the top career
administrators in the government went up $4,095,
or 11.5 percent. The salaries of those who are
four management levels down went up $12,137,
or44 percent. Now tell me — is that any way to
run a railroad, much less a government? No one
would run a business that way, and I doubt that
even the most socialistic of countries run their

governments that way. Such grade compression is
totally inconsistent with our country's economic
The fault for this salary compression lies mainly
with the Congress, although recent Presidents must
share the blame. I am not able to judge how much
a Senator or a Congressman is worth, although
many that I know clearly deserve substantially
higher salaries than they have been receiving. I
can understand Congress being reluctant to raise
its own salaries — that is a decision fo r the Congress
to make. But what has been irresponsible has been
the decision of Congress that, if their salaries are
constrained at unreasonably low levels, so must
the civil servant's salary and the salaries of those
appointed by the President. The logic of that
eludes me.
While we have just had an increase in
governmental salaries, my concern remains. The
illogical salary compression at the top levels of
government still exists — even at the new salary
The GS-18 still is not paid any more than most
of the GS-17s and some of the GS-16s. A promising
young examiner who has seen a salary lid placed at
the top levels during the last six years can see it all
happening again. This strikes me as a serious
problem for the government, and particularly for
agencies such as the FDIC with its heavy
complement of professionals.
Let me repeat — the FDIC can only be as good
as the individuals which together make the agency.
I think they are a superior group of employees and
I'm proud of their performance during these last
few d iffic u lt years. If we continue to make the
position of an FDIC employee one of which an
individual w ill be proud, and if we pay the leaders
in the agency what they are truly worth, we will
have good bank supervision and regulation.
Essentially, my position is that if we have good
people in the banking agencies, banking supervision
is going to be carried out in an efficient and quality
manner. W ithout good people, changes in
organization structure cannot help very much.
I have made many speeches and testified at
great lengths about the performance of the banking
agencies and the banking industry over the past
few years. To summarize, 1 feel the agencies have
done a good job of containing the problems in the
banking industry which the recession made
apparent. The agencies have been able to offer
solutions for insider abuses, they have become
more formal and litigious in their supervisory
relationships with banks when necessary, they
have adopted or are experimenting with
computer-based early warning systems and
examination, they have adjusted (albeit slowly) to
their additional responsibilities beyond safety

and soundness, and they have modernized their
internal organizational arrangements. They have
expanded their employee training and educational
opportunities, they have sought greater disclosure
from the industry and provided greater disclosure
about themselves, they have racially and sexually
integrated their own professional ranks, and they
have experimented with state supervisors to see if
a way can be found to eliminate any unnecessary
duplication of examination and supervision effort.
They have done this while t-he banking industry
has expanded from $720 billion in assets in 1970
to $1.4 trillion in 1976. Very large bank failures
and a great many smaller failures have occurred in
the last few years and scare stories have appeared
in many newspapers, yet the actual impact of
these failures in the communities has been
minimal, and the confidence of the public in the
banking system remains undisturbed. In some
respects, the confidence of the public may be
stronger now than before these trying times,
because we have demonstrated that the agencies
can handle serious problems without undue
All in all, I think the agencies have done a good job.
It is true that in the last few years we have had
a somewhat larger number of bank failures than
has been the case in years of lower inflation rates
and a more stable general economy. It is also true
that the recent bank failures have involved larger
banks* than those in earlier years, a fact that is
probably the major reason for the increased
Congressional interest in oversight of the banking
agencies. But I fail to see the connection between
bank failures and need for restructuring the
banking agencies. Let me emphasize this point. If
the American public and the Congress so
determine, we could probably supervise banks in a
way that would almost assure no, or very, very
few failures with our present supervisory
structure. As a matter o f fact, our average number
of failures per year during the past twenty years
has almost been at that point — slightly over 5
banks per year out of 1 5,000 that exist. To go
from 5 to 2 or 3 a year would require a massive
and conservative set of ground rules under which
banks would operate, and a more pervasive
supervisory presence in the banking business. The
result would, in my judgment, be an undesirable
one from the point o f view of the availability,
adequacy, cost and innovativeness of banking
services to the public, and would involve a degree
of government interference in the financial
markets and processes of our economy that I
would be reluctant to see. But we can do it if the
* l t should not be overlooked, however, that banks have grown
dramatically in size. A billion dollar bank would have been the
24th largest bank in- the country 20 years ago; today it would be
the 133rd largest. A $500 m illion bank would have been the 60th
largest bank 20 years ago; today it would be the 265th.

Congress so decrees, and we could make it very I
unlikely that a bank would fail — all without
changing the supervisory structure at all.
Even those who most believe in the need for
reorganizing the banking agencies have not been
willing to indicate clearly their desire to eliminate
bank failures. I think they recognize the point
made by the former Chairman of the House
Banking Committee, Wright Patman, in his speech!
dedicating the FDIC building in 1963 in which he!
criticized the FDIC and the other banking agenciel
not because of too many bank failures, but
becauser there were too few. He recognized bank I
failures as an unavoidable sign of a vigorous,
competitive banking system. While the critics of I
the present banking supervisory system will not I
concede that they are opposed to all bank
failures, they do express their unhappiness about!
each bank failure, or at least about each large one]
Of course, it may be that it is not the failure ofl
a bank that generates criticism, but rather the
losses suffered by customers when a bank is
closed. Depositor losses, as I'm sure you all know]
are extremely modest under the present system.
In the 16 bank failures in 1976, for example,
nearly 98 percent of all deposits were immediately
available to the depositors, and another 1 percent
(making the total over 99 percent) was available
in a few days. The remaining 1 percent may or
may not be a loss depending on the results of the
liquidation. But even these very low losses can
easily be eliminated w ithin the present structure.
We could adopt 100 percent deposit insurance or,
with relatively modest changes in the Federal
Deposit Insurance Act, we could have a system in
which the FDIC would always find a sound bank
or group willing to take over all of the liabilities
of the failing bank. We could even provide investo
insurance if that is what is wanted — we could takel
all or a substantial part of the risk out of investing!
in bank stocks. Under such a system bank
customers and investors would be totally
unaffected by the failure of a bank in their
community. A.gain, I am not claiming that these
changes would be desirable; in fact, I believe they I
are extremely undesirable. I am only saying that
they could be accomplished w ithout any significant
change in the structure of banking supervision.
The call for reform of the banking agencies thenl
must be based on something more than the
existence or impact of occasional bank failures. It I
may be based on concern that the present
supervisory structure does not prevent failures
that could be prevented under some other
structure. The claim is frequently made that the
present organization leads to breakdown of
communication and coordination among the
agencies. I cannot speak from personal experience I
with the distant past, but I am familiar with the

landling of the sizable bank failures of the last
five or six years. There is no case of which it can
kg said with any accuracy that lack of coordination
or communication among the banking agencies
contributed in any way to the failure. Let me
repeat that because I believe it is so important. No
L nk fa ile d during the past six years because of a
failure of coordination or cooperation between
[he bank regulatory agencies.
That is not to say that the agencies never made
[any mistakes. Mistakes are a function of people,
friistakes have happened under the present
[structure and could happen under any structure.
[it is possible, for example, that the problems of
[theU nited States National Bank could have been
[detected earlier. Given the size and sophistication
of the fraud involved in that bank, however, it is
hard to believe that any reasonably earlier
detection of its extent would have prevented its
failure. I don't know anything which suggests that
simply reorganizing the agencies would lead to an
earlier detection of fraud. It is possible that the
resolution ( n o t the discovery of the problem) of
the Franklin National Bank situation could have
been handled more rapidly with a reorganized
structure, but I think there are solid reasons for
believing that a quicker resolution might have
produced a less desirable result. In fact, if there
were only one agency involved in such a situation,
it is possible (although I must confess, not
probable) that it might try to conceal the status
of the bank to avoid answering questions about its
failure. In neither Franklin nor U.S. National did
the Comptroller shirk from his responsibilities.
Had he been a different kind of individual and
inclined to cover up the mistakes of the agency,
he w o uld have had a very good chance of doing so
in a single-agency regulatory structure in which he
was the Chairman. In any event, in neither Franklin
nor U.S. National did problems of interagency
coordination adversely affect the final outcome.
In my recent testimony before the Senate
Banking Committee, I traced the series of
extremely unusual and unlucky economic
developments that beset the banking system over
the last several years — problems such as the
energy crises, double-digit inflation, the worst
recession since the 1930s, the move to floating
exchange rates, and the related economic problems
of the LDC's. Looked at in this context, the
banking industry has come through in surprisingly
good shape.
I would have to conclude, then, that the
performance of the banking agencies has been
good during the past few years, and any
reorganization would have to be based on some
rationale other than poor performance of their

There are other reasons sometimes advanced
for changes in supervisory structure. It is
sometimes said, for example, that there would be
cost economies that might result from
consolidation of the agencies. While there is some
merit to this argument, sizable savings cannot be
expected. There would still remain the same
number of banks to examine, the same assets to
be liquidated, and the same series of banking and
financial problems to solve. The best discussion of
the arguments for and against consolidation of
the banking agencies which I have seen can be
found in the testimony of Frank Wille, then
Chairman of the FDIC, before the Senate
Committee on Banking, Housing and Urban
Affairs in December of 1975, and I commend it to
you. In that part of his testimony addressed to
the pros and cons of a single banking agency,
Mr. Wille does point out that some modest
savings could be expected from such consolidation.
No one, however, including Mr. Wille, has suggested
that those savings would be sizable, or that the
possible harm might not outweigh them.
One has to turn to some other explanation,
therefore, and I am not sure I can provide that
explanation. It may just be that advocates of
consolidation may simply wish to eliminate one
or more of the agencies with which they are
dissatisfied for any of a number of institutional
reasons. It may be that Congressional advocates
feel that they have not been able to exercise their
oversight responsibility well because of the
number of agencies and their diverse responsibilities,
although I feel that recent GAO audit activities
have reduced some of that fear. Whatever the basis,
the desire still remains among some to consolidate
the banking agencies.
A fter saying all this, logic suggests that I would
be opposed to any reorganization of the banking
agencies. The fact is, I am not opposed to all
I do not think that reorganization is necessary.
I do not think it should be an important problem
facing Congress, the agencies or banking
supervision, and I certainly don't think it should
take as much time from other more important
matters as it already has. Clearly, I don't think it
will accomplish a great deal which will benefit the
But maybe there are some small changes which
can be made which w ill provide some modest
benefits for the public w ithout resulting in some
more sizable disadvantages. If such changes will,
at the same time, put behind us the time-consuming
consideration of agency consolidation, they would
be desirable. For these reasons, I would be
prepared to support a modest proposal for agency

Before setting out that proposal, however, I
would like to discuss significant reorganization
effects that would flow from the adoption of
ideas or legislation designed primarily for other
As a first principle, I believe that if reorganization
should come, any changes should be made directly
and openly after a full discussion of the merits and
costs of such change. Change in the structure of
banking regulation should not be made accidentally
while trying to solve other problems. There should
be no hidden agenda in our discussions of banking
regulation. This may seem obvious, particularly
since Congress so overwhelmingly passed the
Government in the Sunshine Act, but I mention
this explicitly because there have been some
proposals in the Congress that, whether intended
or not, would have substantial effect on the
structure of banking supervision.
Last year, and again in this session of Congress,
a bill has been introduced entitled "Com petition
in Banking Act of 1977." Part of the bill (S. 72)
relates to restrictions on bank mergers, and it is
this section of the bill that has received the most
attention. But other parts of the bill give
substantial new supervisory responsibility over
banks to the Federal Reserve. One section of the
bill would extend the authority of the Federal
Reserve Board to determine capital adequacy of
all banks that are part o f a holding company
regardless of whether the banks are national banks
or even members of the Federal Reserve System.
In many respects, capital adequacy remains the
heart of banking supervision so this appears to be
an enormous grant of power to the Federal
Reserve. When we consider that most sizable
banks are now subsidiaries of holding companies
(holding company banks account for 64 percent
of total bank assets in the U.S.), it is clear that
this represents a significant increase in the Board's
supervisory power over banks and a significant
diminution in the supervisory powers and the
effectiveness of the Comptroller and the FDIC.
Some analysts have concluded that this grant of
authority alone might accomplish indirectly the
consolidation of the bank regulatory agencies
that the sponsor of this bill has indicated he
Another proposal that I have already alluded to
may have a similar impact. These are the proposals
to subject the FDIC and the Comptroller to the
appropriations process. I consider this a very
serious mistake from the point of view of
confidence of the public in the banking system, as
well as the quality of banking supervision in the
U.S. In fact, one of my first speeches as Chairman
of the FDIC was directed to this particular issue.

From the standpoint of the impact on agency
reorganization, it is important to note that
Senator Proxmire's proposal would subject the
FDIC and the Comptroller to the appropriations
process but not the Federal Reserve. This probably
would tend, over time, to improve the quality of
programs and personnel at the Federal Reserve
vis-a-vis the Comptroller and the FDIC.
I want to make clear that I am not suggesting
that the banking agencies or any federal agency
should be independent of the Congress. The FDIC
is a creature of the Congress and obviously subject
to control by the Congress. Congress has and should
have the power to make any changes it sees f i t in
FDIC powers and operations. Those changes should
be made openly, however, and not indirectly
through provisions tacked on to an appropriations
bill, as part of a process of political pressure during
discussions of budgets, or as an exchange (albeit
subtle) of something the agency wants for a job
for a friend of the Legislative or Executive
A third example of indirect reorganization is the
proposal fo ra "Federal Bank Examination
Council." This is theoretically aimed at promoting
"progressive and vigilant bank supervision," but
goes about it by imposing uniform examination
standards and procedures. This bill would create a
council composed of the Comptroller of the
Currency, the Chairman of the FDIC and the
Chairman of the Federal Reserve Board, with the
Federal Reserve Chairman as chairman of the
Council. The designation of the Federal Reserve
Chairman to the top position on a bank
examination council is obviously a major weakness
in that the Federal Reserve now supervises far
fewer banks with far fewer assets than either the
FDIC or the Comptroller. Bank supervision, while
important, is not the major reason the Federal
Reserve exists. Some statistical proof of this is that
less than 4 percent of the employees of the Federal
Reserve System are bank examiners; check clearing
and monetary policy account for the largest
number of personnel in the Federal Reserve
System, and certainly monetary policy is the most
important responsibility.
While a rotating chairmanship of such a Council
might eliminate some objection to it, it would not
eliminate the objection to mandated uniform
examination procedures. If there is merit to the
concept of separate federal supervisory agencies
and to a dual banking system with state and
federal supervision of banks, the benefit would
seem to be the opportunity to try different
approaches and experiment w ith the diversity of
examination and supervisory techniques. The
possibility of useful innovation and improvement

of the bank supervisory process is greater if the
several agencies are free to experiment individually
with new supervisory methods than if every change
¡nexamination methodology requires approval of a
majority of the federal regulators. We believe that
the objectives of the bill could be achieved w ithout
further consolidation of authority in the Federal
Reserve and w ithout empowering the Council to
mandate uniform examination standards and
procedures. Nevertheless, I cite this legislation
here as another example of agency reorganization
that would take place incidentally or accidentally
if certain legislation is passed.
One further example of an effect on the
structure of supervision by indirection might be
mentioned. There seems to be some support in the
Congress and elsewhere for a package of legislation
that w o u ld involve nationwide NOW accounts,
Federal Reserve payment of interest on reserve
balances held with Federal Reserve Banks, and
perhaps mandatory Federal Reserve reserve
requirements for all banks. This package has many
important implications — implications for
consumers, bank earnings, the U.S. Treasury, and
monetary policy. I feel that it also has strong
implications for agency reorganization, particularly
when read in conjunction with the other legislation
I have mentioned, namely:
• the Federal Reserve to determine capital
adequacy for all holding company banks;
• the Federal Reserve to chair a mandatory
bank examination council;
• the Federal Reserve to be free of the
appropriations process, while the FDIC and
the Comptroller's Office would be subjected
to it.
All of this, of course, must be read against a
background in which the Federal Reserve is the
sole federal regulator for all bank holding
companies, and can set its own rules for lending
to both member and nonmember banks.
The result of all of this would be a very strong
Federal Reserve and a relatively weak FDIC and
Comptroller's Office. Now maybe that is what we
want and maybe it is in the public interest, but
that ought to be determined directly rather than
appearing as an unexpected side effect of
legislation adopted primarily for other purposes.
Let me repeat at this point that I am not in
favor of substantial consolidation or centralization
of banking supervision. I do not think that the
reasons advanced for it outweigh the disadvantages.
While I feel that the present system of bank
supervision works well, my objection to
consolidation is not based just on the view that if
something is working all right one should leave it
elone, but also on the view that there are positive

benefits from having several different banking
First, the public is benefitted from the alternative
approaches to problems that arise from having
more than one banking supervisory agency.
Second, one advantage of a system containing
more than a single agency is that it provides
Congress, and the agencies themselves, with an
informed group of potential critics (the other
agencies who have no vested financial interest in
the outcome of a particular course of action). This
is a luxury that has not always been available in
the case of other government regulatory agencies
whose critics generally have come only from the
industry being regulated.
Third, differences in agency policy, sometimes
influenced by the hint of a shift in supervisors,
have performed a positive role in limiting
unreasonable, inflexible or arbitrary behavior on
the part of one or more of these agencies. Not all
agency shopping has been contrary to the public
interest, and almost none of the competition
among agencies is competition in laxity. There are
instances where the initial agency has not been
sufficiently receptive to public need or changing
practices, or where it was too strongly influenced
by the existing banking establishment as, for
example, in chartering or branching policies. In
such instances, a change of supervisory authority
by the dissatisfied bank or its organizers may well
have been in the public interest. The availability of
a choice among supervisory authority has, of
course, been the lifeline of the dual banking
system of this country.
This leads me to a rather modest proposal
which I think has the merit of achieving in a more
formal way some of the increased coordination
that many seem to want w ithout eliminating the
diversity and opportunity for innovation which I
believe is important. I suggest that the Office of
the Comptroller of the Currency be reorganized
as a three-man board. The Comptroller's Office
over the years has received a good deal of criticism
(most of it, in my opinion, undeserved), as
reflecting the arbitrary whims of the one individual
responsible for the Office. I believe that
reorganization as a board would alleviate some
Congressional concern on that score, w ithout
interfering with the ability of that agency to
perform its long-standing responsibilities of bank
I would then propose that the Comptroller be
removed as a statutory member of the FDIC Board
of Directors, and that the Chairman of the FDIC or
his designee serve as a member of the Comptroller's
Board and also as a member of the Federal Reserve
Board, (whether a voting member or a nonvoting
member seems immaterial). This is in accord with a

suggestion made in our Annual Report for 1976
when I pointed out that "the FDIC might know
more about all the banks it insures if it had a
representative in the offices or on the boards of
the other bank regulatory agencies." This seems
more logical to me than the existing arrangement
in which the Comptroller is a member of the Board
of the FDIC. From a personal standpoint, I have
found both Comptrollers with whom I've shared
membership on the FDIC Board of Directors to be
helpful, responsible members who contributed
substantially to the Board's performance; it is not
for personal reasons that I suggest these changes.
Deposit insurance is really the cornerstone of
our system of bank supervision. Virtually all banks
in this country are insured, and the insurance
provides immeasurable confidence for the banking
system. Academic experts as varied in their
viewpoints as M ilton Friedman and John Kenneth
Galbraith have stressed the importance of the
FDIC. Its representation on the boards of the
other agencies would provide a means of assuring
that appropriate information on the activities of

the other agencies is considered by the FDIC and I
that the FDIC has the opportunity to make its
viewpoint known in the deliberations of the other I
agencies. This proposal appropriately provides for I
some of the additional interagency coordination
that seems to be desired and seems to be
appropriate. It provides for the better flow of
information concerning the condition of all banks I
to the FDIC, and even earlier notice of problems I
than we now receive.
Let me conclude by emphasizing that I am not
necessarily opposed to reorganization or to all
possible changes. I am opposed, however, to
reorganization simply for reorganization's sake.
The quality of bank supervision depends upon
ensuring a plentiful supply of good and talented
bureaucrats who are proud of a career in bank
supervision and who can see an increasing financial
reward as their careers progress. Changing our
present supervisory structure is unlikely to improve
significantly the quality of banking supervision, so
any changes that might be made should be modest

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