Correspondence between the field examiner and the Bureau sheds light on the tribulations of early members of the field force. W. Coombs, who covered the State of Pennsylvania, wrote McCulloch on September 30, 1864, that his expenses had been larger than ever before "owing to having considerable carriage fare, and Philadelphia expenses" and requested $350. A year later, a New England examiner, Noah Woods, complained that “to date" he had received no pay for examining 61 banks and requested the Comptroller to tell him how much he was entitled to. Complaints to the home office became so frequent that in 1869 Comptroller Hulburd asked Congress to change the law, providing for an increase in compensation of examiners and an assessment of the banks in proportion to the time and labor spent on their examination. No appropriation of money would be necessary, he assured the legislators, since all expenses would be defrayed by the banks. But not until February 19, 1875, did Congress approve an amendment providing that all bank examiners assigned to nonreserve cities and states other than Oregon, Nevada, and California receive compensation based upon the capital of the examined bank. The scale estab lished is shown in Table 4-3. Examiners in reserve cities, the three designated states, and the territories were to have their compensation fixed by the Secretary of the Treasury upon the recommendation of the Comptroller. The banks continued to bear the cost of examination, paying their fees in accordance with the statutory scale. Examiners received no other compensation; moreover, from their gross receipts they had to pay the wages of assistants and all expenses incident to their travel. Although as a rule of thumb it was assumed that an examiner's net income would average about two-thirds of his gross, his true compensation must have varied considerably. Obviously, it was to any particular examiner's advantage to hurry his work and get on to a new job, the fee being the same whether he took one day or three days. Moreover, to minimize travel expense examiners ordinarily followed predictable routes, going the shortest possible distances from one bank to another. Needless to say, banks could make fairly accurate guesses as to the approximate date of forthcoming examination and could make their preparations accordingly. Beginning with Comptroller Cannon in 1884 successive Comptrollers pleaded for both higher pay and a different method of paying the examination force. Cannon, for example, believed that fees based on the capital of a bank were unfair, that a formula including both capital and average deposits should be used. In his Report of 1887 Comptroller Trenholm recommended that Congress drastically change the system of compensation, suggesting that certain examinations be paid out of congressionally appropriated funds and hinting that it might be well to abolish the fee system entirely. In 1893 Comptroller Eckels went further to recommend to Congress that the Comptroller be allowed to fix the compensation of all examiners without regard to fees earned. Four years later he asked that the fee system be abolished and that examiners be paid a fixed salary with an allowance for travel and other necessary expenses. "With a fixed salary," he wrote, “in stead of an already-determined fee, examiners would be in [a] position to apportion their time, in making examinations, in accordance with the needs of the banks examined. Only in this way can be had that complete scrutiny of a bank's affairs which is due to the officers and shareholders and to its patrons and the general public." 23 Three years later, Eckels' successor, Comptroller Dawes, echoed his sentiments, as did Comptrollers Ridgely and Murray. Yet not until the passage of the Federal Reserve Act did Congress finally abolish the fee system. Removal of inequities of reimbursement did not, of course, solve all the problems of bank examination. The geographic assignments of bank examiners were such that they were rarely in touch with each other, so that there was lack of uniformity in procedures and principles. The fact that examiners hired their own assistants, who were in no way responsible to the Comptroller, made for wide variations in quality of the staff. Moreover, as late as 1913 banks could engage in the most outrageous practices aimed at avoiding the examiner's wrath. It was not uncommon to transfer bad assets to other banks or corporations during the period of examination, borrowing more acceptable securities in the meantime. The affili ates of commercial banks might be in a condition so bad as to jeopardize a bank's solvency, yet affiliates were beyond the authority of national supervision. Despite the difficulties, a loyal corps of civil servants, working long hours and suffering the pains of pre-World War I travel, assured a quality of national-bank supervision not ordinarily reached by state banks. But for all their labors, forces were at work to undermine the good achieved by the most effective oversight of financial institutions. Reports of Condition. The problem of call reports occupied the early Comptrollers. In his first Annual Report, McCulloch noted that the portion of the law dealing with quarterly reports needed strengthening. In 1867 Comptroller Hulburd criticized both the quarterly reports (a detailed statement of the bank's affairs) and the monthly statement (showing the bank's average circulation, deposits, lawful money, and balance available for redemption of their circulating notes.) About the former he observed, tongue in cheek: It is known, understood, and anticipated, by all who have dealings with the banks, that they are in the habit of preparing systematically for making creditable exhibits on quarter day. It is certainly a point gained to know that the banks can make a good showing at least once every quarter; but it would be more satisfactory to know that they do so at all times.24 23 Comptroller of the Currency, Annual Report, 1897, p. lxxv. 24 Comptroller of the Currency, Annual Report, 1867, p. vii. Charles G. Dawes, who later gained fame as an international figure and as Vice President of the United States, was Comptroller from 1898 to 1901, while he was still in his thirties. He attacked the monthly report as being too vague to give any useful information at all. Hulburd recommended that, in addition to a more detailed monthly report, a full statement of condition be submitted five times a year as of a past date announced without warning by the Comptroller. Hulburd's suggestions, for such a detailed monthly report plus the five "call" reports to replace those then in use, were ignored for two years. On March 3, 1869, Congress approved an act encompassing Hulburd's recommendations, and the third Comptroller thus initiated the practice of the surprise call date. The ability of the Comptroller to choose random call dates would prevent the practice, known as "windowdressing," of doctoring the records to show a condition not warranted by the fact. The success of this new supervisory tool pleased Hulburd, for he wrote that it enabled the banks to set forth "the actual working condition without manipulation or prepara tion. . . . "25 The 1869 law also empowered the Comptroller to call for special reports. Any association that failed to report was subject to a penalty of $100 for each day of delay. Furthermore, every national banking association had to report to the Comptroller, under oath, the amount of dividends declared and its net earnings in excess of dividends within 10 days after declaration. Failure to comply also brought a penalty of $100 per day. The usefulness of these reports of condition became so great that in 1889 Edward Lacey remarked that associations in reserve cities had long expressed a desire to receive more frequent information on the condition of their correspondents and other banks. That year the American Bankers Association passed a resolution requesting the Comptroller to publish a detailed report of condition during the first half of the year. Lacey asked Congress to provide the necessary funds for this semi-annual publication. Nothing came of the request, and the following year he repeated it, stating that "Twelve months seems a long time to wait, in this progressive age, for information so important." 26 Multi-Office and Multi-Unit Banking Branches of National Banks When the national banking system was established, there was little or no controversy over branch banks. As we have observed, there were at that time two types of branch systems in the United States, the great state systems of the Midwest and the Southern systems dominated by a head office. Examination of the legislative history of the Currency Act of 1863 and the National Banking Act of 1864 (statutorily redesignated the "National Bank Act" in 1874) reveals no special concern about branches, and not until passage of the 1865 law levying the 10 percent tax on statebank notes was there statutory mention of the matter. This legislation allowed state banks converting to national charters to keep their branches provided that definite capitals were assigned to the "mother bank and |