REVIEW SECTIONS: FEBRUARY 7, 1964. Mr. Greensides called the writer to advise that he had received a call from Administrative Assistant Faulstich of the Comptroller's Office requesting that we temporarily suspend our reviews of examination reports in the Liberty Loan Building. The reason for this is that there is some rearranging of office space and files which will necessitate the use of the space we utilize. Mr. Faulstich is to notify the Corporation as soon as this space is available for resumption of our review activity. WALLACE A. RYEN, Assistant Chief, Division of Examination. FEBRUARY 24, 1964. Re review of national bank examination reports. Mr. GREEN SIDES, Chief, Division of Examination, Federal Deposit Insurance Corporation: The writer telephoned Mr. A. J. Faulstich, Administrative Assistant to the Comptroller of the Currency, this morning to ascertain when the office space in the Liberty Loan Building would again be available for our use in reviewing examination reports. Mr. Faulstich advised that their general files room was overcrowded and that it would be necessary to take over the office space we heretofore have occupied. However he also advised that another room farther down the hall would be made available to us and he hoped that this could be done within the next week. THE FILE: WALLACE A. RYEN, Assistant Chief, Division of Examination. APRIL 23, 1964. Chief Edward H. DeHority telephoned Mr. A. J. Faulstich, Administrative Assistant to Comptroller of the Currency, at 4 p.m. this afternoon to ascertain when it would be possible for the Corporation to resume reviews of national bank examination reports in the Liberty Loan Building. Mr. Faulstich stated that he would check on this matter and let us know shortly. WALLACE A. RYEN, Assistant Chief, Division of Examination. Feb. 11, 1964 Feb. 13, 1964 Feb. 5, 1964 Mar. 4, 1964 Feb. 24, 1964 Feb. 24, 1964 First National Bank of Moravia, N.Y. Oneida Valley National Bank of Oneida, N.Y_. Dixie National Bank of Dade County, Kendall, Fla__ Citizens National Bank of Lansford, Pa- Union National Bank of Carnegie, Pa-- Emerson National Bank of Warrensburg, N.Y. Sullivan County National Bank of Liberty, N.Y. Feb. 17, 1964 Jan. 27, 1964 Feb. 13, 1964 Feb. 17, 1964 Feb. 17, 1964 Feb. 17, 1964 Feb. 17, 1964 Feb. 3, 1964 Feb. 3, 1964 First National Bank of Lawrence County at New Castle, Pa___ Feb. 17, 1964 First National Bank in Viroqua, Wis___ Continental National Bank, Harlowton, Mont_. Ramsey National Bank of Devils Lake, N. Dak_. Feb. 24, 1964 Feb. 24, 1964 Feb. 24, 1964 Feb. 18, 1964 Feb. 18, 1964 Feb. 24, 1964 Feb. 26, 1964 Feb. 24, 1964 Mar. 4, 1964 Mar. 2, 1964 Feb. 13, 1964 Feb. 18, 1964 Feb. 17, 1964 Feb. 18, 1964 Feb. 3, 1964 Feb. 27, 1964 Feb. 18, 1964 Feb. 17, 1964 Feb. 17, 1964 Central Northwestern National Bank of Minneapolis, Minn--- Feb. 19, 1964 First National Bank, Pleasanton, Calif_ Kindly furnish this office the latest report of examination of the above-listed bank. Date returned_. Receipt acknowledged by-- FEDERAL DEPOSIT INSURANCE CORPORATION, By EXHIBIT 3.-DIVERSION OF PUBLIC FUNDS RESULTING FROM COMPTROLLER'S UNAUTHORIZED MANAGEMENT PRACTICES The accounting methods and procedures of the Office of the Comptroller of the Currency are questionable and appear in violation of the statutes. Specifically title 12, section 482, of the United States Code, provides in part (and I quote) that “*** all national banks exercising fiduciary powers and all banks or trust companies in the District of Columbia exercising fiduciary powers shall be assessed by the Comptroller of the Currency for the examination of their fiduciary activities a fee adequate to cover the expense thereof." The staff of this committee requested an explanation of the questionable accounting practices and received in return a financial schedule from the Office of the Comptroller of the Currency. A copy of that schedule follows. Parts of the schedule are labeled "Explanation" and footnotes "1," "2," and "3.” In the paragraph titled "Explanation" we find the following statements: "This Office has found no reason for establishing separate accounts on cost systems to show the cost of operations in relation to each separate source of income ***" Further, the figures shown on the schedule "* ** represent no more than estimates ***" and "the figures are not represented as accurate or reliable***" However, the schedule shows that in 1963 the cost of trust examinations exceeded the amounts charged to the banks by about $277,000. It appears that the statute does not mean what it states or else the Office of the Comptroller of the Currency is violating that statute. An additional point in this area with reference to the complete operations of the Comptroller of the Currency is that assessments in total are less than the total expenses by more than $100,000. Only by charging the Federal Reserve System over $400,000 for examination reports, the banks over $200,000 for publications, and U.S. Treasury interest payments amounting to over $350,000 can a profit of almost $1 million be realized. The payments by the Federal Reserve System and the U.S. Treasury represent diversions from the U.S. Treasury, at the expense of the taxpaying public, for the benefit of certain national banks. Additional apparent violations of the statutes relate to the expense of examinations of affiliates of national banks and to the expense of "additional examinations" of national banks. Title 12, section 481, of the United States Code, provides for the assessment of the expense of examinations of affiliates of national banks against the affiliates or the affiliated national banks, and section 482 provides that banks examined more frequently than twice in one calendar year shall, in addition to the regular assessments, be assessed the expense of these additional examinations. The income and expenses pertaining to these two types of examinations are included in the column entitled "Trust Examinations" of the schedule that follows. OFFICE OF THE COMPTROLLER OF THE CURRENCY Cost estimates in relation to sources of income for calendar year 1963 (EXPLANATION.-12 U.S.C. 481 provides that assessments collected from national banks shall be used to pay the expenses of the Office of the Comptroller of the Currency. There is no law prohibiting the use of income from other sources to pay expenses of the Comptroller of the Currency. All income of this Office goes into one general account and all expenses of this Office are paid out of that account. This Office has found no reason for establishing separate accounts or cost systems to show the cost of operations in relation to each separate source of income, because any and all sources of income are available to pay any expenses of this Office. The only reason for preparing the estimates below was to satisfy a request received from a staff member of the Subcommittee on Domestic Finance of the Committee on Banking and Currency, House of Representatives. Figures in columns 2, 3, 4, and 5 represent no more than estimates of cost distributions worked up by the accounting staff of this Office during the period Jan. 12 to Jan. 22, 1965, by references to journal entries and vouchers and assumptions with respect to income-expense relationships. The figures are not represented as accurate or reliable on the basis of sound accounting principles and records.) |