Office of the Comptroller of the Currency - History

Office of the Comptroller of the Currency - History


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Office of the Comptroller of the Currency - founded in 1863, it is one of the agencies of the Department of the Treasury. The office is headed by the Comptroller of the Currency, and the agency is responsible for administering federal banking laws and supervising the activities of the 4,700 national banks. In addition, the Comptroller directs a staff of 2,100 bank examiners, who investigate to make sure that all the national banks are financially secure and operating well.

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Records of the office of the Comptroller of the Currency

Established: In the Department of the Treasury by an act of February 25, 1863 (12 Stat. 665).

Functions: Administers the national banking system.

Related Records:
Record copies of publications of the Office of the Comptroller of the Currency in RG 287, Publications of the U.S. Government.
Records of the Federal Deposit Insurance Corporation, RG 34.
Records of the Treasurer of the United States, RG 50.
General Records of the Department of the Treasury, RG 56.
Records of the Federal Reserve System, RG 82.
Records of the Bureau of Engraving and Printing, RG 318.

101.2 Records of the Organization Division
1863-1981

Textual Records: Case files (638 ft.) relating to organization and voluntary liquidation of closed national banks, 1863-1967 closed District of Columbia nonnational banks, savings institutions, and building and loan associations, 1909-67 and National Agricultural Credit Corporations, 1925-38. Records relating to the banking emergency of 1933 and the issue of licenses to national banks, nonfederal credit unions in the District, and other banking institutions to reopen after the "bank holiday," 1933-47. Incomplete applications for authority to organize national banks, 1872-1903. Correspondence with and about state and private banks seeking national bank status, 1904-10 banks in foreign countries, 1903-10 and banks in U.S. insular possessions, 1902-8. Correspondence with national banks concerning establishment of branch banks, 1923-24. Merger, charter, consolidation, and other types of certificate, 1863-1981, with microfilm copies (5 rolls). Various types of authorization, 1863-1981, with microfilm copies (13 rolls).

Finding Aids: Lyle J. Holverstott, comp., "Preliminary Checklist of the Records of the Organization Division," PC 46-28 (Feb. 1946).

101.3 Records of the Division of Issue
1863-1935

Textual Records: Ledgers of national banknote circulation (currency and bond ledgers), 1863-1935. Records received from the Bureau of Engraving and Printing, consisting of ledgers of national banknotes issued to national banks, 1863-87 and registers of Treasury numbers on national bank currency, 1864-1912. Journal of gold note circulation, 1871-84.

101.4 Records of the Examining Division (Division of Reports)
1863-1927

Textual Records: Bank examiners' reports and correspondence relating to national banks and other banking institutions, 1863-1913 and 1914-17. Field reports of Bank Examiner John B. Cunningham for national banks located in KS, MO, NE, and the Indian Territory, 1898-99 (in Kansas City). Correspondence with government and other officials, 1863-1926. Reports and correspondence concerning examination of nonnational banks, trust companies, and building and loan associations in the District of Columbia, 1874-1914. Reports of examining committees, 1912-13. Miscellaneous correspondence, 1864-1927.

Finding Aids: Maxcy R. Dickson and J. Eric Maddox, comps., "Preliminary Checklist of the Records of the Division of Reports," PC 46-51 (June 1946).

101.5 Records of the Division of Insolvent National Banks
1865-1950

Finding Aids: Lyle J. Holverstott, Maxcy R. Dickson, and J. Eric Maddox, comps. "Preliminary Checklist of Records of the Division of Insolvent National Banks of the Bureau of the Comptroller of the Currency, 1865-1945," PC 45 (June 1946).

101.5.1 General records

Textual Records: Comptroller's correspondence with national bank receivers and others concerning administration of receiverships, 1865-1950. Receivership records sent to the Comptroller, 1865- 1927. Conservator Division correspondence file, 1933-35. General correspondence about receiverships numbering from 577, with an index, 1913-48. Receivers' first, quarterly, and final reports, 1913-50. Dividend schedules, 1893-1950. Statements of disbursing accounts, 1879-1920. Comptroller's letters and telegrams to receivers and government officials regarding the liquidation of insolvent banks, 1872-1934. Records relating to the administration of the Guardian National Bank of Commerce (Detroit, MI) and the First National Bank of Detroit, 1933-46.

Finding Aids: John E. Maddox, comp., "Preliminary Checklist of the Records of the Division of Insolvent National Banks Relating to the Receivership of the First National Bank-Detroit, Detroit Michigan, 1933-46," PC 48-1 (Oct. 1947).

101.5.2 Records of the Special Liquidator of Securities

Textual Records: Correspondence of the Special Liquidator of Securities relating to open accounts, 1933-39 with bank receivers, the Federal Reserve Bank of New York, the Comptroller of the Currency, and brokers, 1932-39 and with the Reconstruction Finance Corporation (RFC) and discontinued depositories, 1932-36. Brokers' sales tickets, 1932-39. Withdrawal authorities and withdrawal tickets, 1932-39. Vault vouchers, 1932-39. Brokers' sales analysis, 1932-36. Record books of securities received and delivered to the RFC, 1932-39.

101.5.3 Records of the Finance and Audit Section

Textual Records: Miscellaneous account books, 1868-1944.

101.5.4 Records of the Freedman's Savings and Trust Company

Textual Records: Correspondence, 1870-1914. Minutes and Journals, 1865-74. Depositor signature books, n.d. Dividend payment record, 1882-89. Loan and real estate ledgers and journals, 1870-1916. Indexes to deposit ledgers, n.d. Miscellaneous finance and accounting records, 1870-1908.

Microfilm Publications: M816, M817, and M874.

101.6 Records of the Federal Reserve Issue and Redemption Division
1914-44

Textual Records: Correspondence, 1914-43. Daily issue reports, Federal Reserve Notes, 1914-44, and Federal Reserve Currency, 1915-43. Vault balances, Federal Reserve Currency, 1915-23. Destruction schedules documenting issue and redemption of Federal Reserve Notes, 1916-22.

Finding Aids: Henryetta Berry, comp., "Preliminary Checklist of the Records of the Federal Reserve Issue and Redemption Division," PC 649-13 (1948).

101.7 Records of the Personnel and Administrative Division
1909-60

Textual Records: Correspondence relating to bank examiner appointments, 1909-60.

101.8 Records of District Offices
1920-62

History: The six Regional Comptrollers of the Currency were established under the Office of the Comptroller of the Currency in the Department of the Treasury by 12 Stat. 665 on February 25, 1863, to assist in administering the national banking system. The regional OCC's oversee the annual examination of national banks through a staff of bank examiners. These examinations are used by the OCC in assessing the financial condition, management quality, soundness of daily operations, and compliance with Federal banking laws, rules, and regulations by the national banks.

101.8.1 Records of the Midwestern District

History: The Midwestern District Office is located in Kansas City, Missouri, and is responsible for banks headquartered in Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.

Textual Records: Correspondence of the Chief National Bank Examiner, 10th Federal Reserve District, 1920-62. Abstracts summarizing the condition of national banks in the Midwestern district as determined during examination by national bank examiners, 1920-35. Bank examiners' reports, 1920-50.

101.9 Textual Records (General)
1985-95

Training and performance development files, 1985-95.

Bibliographic note: Web version based on Guide to Federal Records in the National Archives of the United States. Compiled by Robert B. Matchette et al. Washington, DC: National Archives and Records Administration, 1995.
3 volumes, 2428 pages.

This Web version is updated from time to time to include records processed since 1995.


Office of the Comptroller of the Currency

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Office of the Comptroller of the Currency (OCC), U.S. government bureau that regulates national banks and federal savings associations. The primary mission of the OCC is to ensure the safety and soundness of the national banking system. The OCC employs a staff of examiners who conduct onsite reviews of national banks and continually supervise bank operations. The agency issues rules and legal interpretations concerning management, investments, lending activities, and other aspects of bank operations.

The National Currency Act was signed by Pres. Abraham Lincoln in February 1863. It created a system of nationally chartered banks to issue standardized national bank notes, and the OCC was established to administer the new banking system. The National Currency Act was superseded by the National Banking Act, which became law in June 1864 and authorized the OCC to hire a staff of national bank examiners to supervise banking institutions. The National Banking Act also gave the OCC authority to regulate lending and investment activities of national banks.

The OCC is part of the U.S. Department of the Treasury, based in Washington, D.C. It is headed by the comptroller of the currency, who is appointed by the president, with the advice and consent of the Senate, for a five-year term. The comptroller also serves as a director of the Federal Deposit Insurance Corporation (FDIC) and as a director of the Neighborhood Reinvestment Corporation, which promotes reinvestment in communities.

The OCC regulated and supervised more than 2,100 national banks and 51 federal branches of foreign banks in the United States as of 2011, but it regulates and supervises only banks with a national charter. In contrast, banks chartered by individual states are regulated and supervised by state banking authorities or the FDIC, and the Federal Reserve Board regulates and supervises bank holding companies and foreign-based affiliates.

OCC bank examiners review the activities of national banks and assess the safety and soundness of banks. In conducting their safety and soundness reviews, they gauge the bank’s exposure to various risks, including market risk, credit risk, liquidity risk, and legal risk. Moreover, they review the bank’s lending procedures and investment portfolios to ensure that the risks associated with these activities are identified, measured, and managed properly. They also assess bank funding operations, the level and quality of bank capital, bank underwriting standards, the quality of bank earnings, and compliance with consumer banking laws.

In addition to conducting safety and soundness bank exams, the OCC has other regulatory duties. These duties include reviewing applications for new bank charters and branches. The OCC can also take enforcement actions against banks that do not comply with banking laws and regulations. The OCC can remove bank officers and directors and can promulgate rules and regulations under the authority of the National Bank Act governing investments, lending, and other practices of national banks. The OCC also provides written guidance to the industry in the form of banking circulars, bulletins, and interpretive releases.


What We Do

The OCC, an independent branch of the U.S. Department of the Treasury, charters, regulates, and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks. The OCC carries out its mission by

  • issuing banking rules and regulations and providing legal interpretations and guidance on banks' corporate decisions that govern their practices.
  • visiting and examining the banks it oversees.
  • evaluating applications for new bank charters or branches for other proposed changes in the corporate structure of banks or their activities and from foreign banks that wish to operate in the United States under an OCC charter.
  • imposing corrective measures, when necessary, on OCC-governed banks that do not comply with laws and regulations or that otherwise engage in unsafe or unsound practices.
  • protecting consumers by making sure banks give fair access and equal treatment to customers and comply with consumer banking laws.


This Biden Nomination Is Extremely Important For Everyday People

Today, we find ourselves in dual public health and economic crises—a situation exacerbated by the Trump administration’s cruel and callous policy decisions, which padded the pockets of the wealthy at the expense of essential workers and other historically marginalized communities. It’s going to take a coordinated, whole-of-government approach to mitigate the unprecedented damage done to the millions of people in America who are struggling to weather these crises. This is not a job for President Joe Biden alone, but the entirety of his administration, including the powerful but little-known Office of the Comptroller of Currency (OCC). Without a doubt, personnel is policy.

We were elected to Congress by constituents who demanded representation that would legislate equity and prosperity—not hurt and harm. The OCC is an agency responsible for ensuring the safety, soundness, and broad accessibility of financial institutions. To lead the agency, Americans deserve someone with both expertise and a firsthand understanding of the struggles of the people the OCC serves. That’s why we urge President Biden to nominate Mehrsa Baradaran to lead the office.

Professor Baradaran is a first-generation American whose family came to the United States seeking asylum when she was 9 years old. Baradaran’s own experiences make her uniquely qualified to understand what many Americans living on the margins are going through. Today, Baradaran is a law professor specializing in banking law who has dedicated her life to understanding how financial regulation affects everyday people, including its central role in perpetuating and exacerbating the racial wealth gap. A renowned expert, she testified in front of Congress about inclusive banking options that can uplift communities and families that are “unbanked” or “underbanked.” As 1 in 4 American households have little to no access to bank accounts, she has proposed innovative solutions like FedAccounts, and postal banking to bridge the banking divide.

We know that equal access to credit is critical when people are looking to buy a home or start a business the head of the OCC can guide the agency in helping make that possible. The office also charters new federal banks and creates banking regulations with significant implications for racial and environmental justice . The OCC monitors bank practices to verify that financial entities are treating their customers fairly and complying with the Community Reinvestment Act (CRA) , a landmark civil rights statute, passed as a response to redlining, that is meant to ensure financial institutions are not refusing to lend in low- to moderate-income communities. It is critical that the Biden Administration, which has promised to prioritize racial equity in the economic recovery, put the right leader in this position. Baradaran understands the inextricable link between the history of racism and banking in the United States and will protect historically marginalized communities from predatory financial practices and products.

The disparities in wealth and opportunity that the CRA was designed to address have only worsened during the Trump administration. In fact, the OCC recently released a rule allowing lenders t o evade state-established interest rate caps and charge consumers exorbitantly high interest rates . At the height of the economic downturn in 2020, the OCC unilaterally “gutted” the CRA , stripping remaining protections for the communities that banks have decided are simply not worth their time or business to serve.

The pandemic has only further exacerbated income inequality in the United States, and the government’s inadequate response has done little to alleviate it. At a time of alarmingly high unemployment rates , President Biden’s choice to lead the OCC can help ensure families have the financial options and support necessary to weather this storm and thrive long after. Professor Baradaran is simply the best person for the job .

President Biden has pledged to address systemic racism in our institutions and bring about racial and economic equity for all. Nominating Professor Baradaran to lead the Office of Comptroller of the Currency would be a demonstrable step in turning these promises into action. Congresswoman Joyce Beatty, who serves as Chair of the Congressional Black Caucus and Chair of the Diversity and Inclusion Subcommittee on House Financial Services, has expressed support for Baradaran , along with many of our colleagues. That’s because we know she will work to uplift the historically marginalized and confront the racial wealth gap. The early days of the Biden Administration have focused on the need to address the damage done under the Trump administration. Not only does Professor Baradaran have the background, experience, and expertise to undo the banking deregulation rampant under recent Comptrollers, she has the resolve to tackle the historical policies and practices of financial oppression against Black and brown communities.

There is no one better than Professor Baradaran to serve as our next Comptroller of the Currency. Our communities deserve her advocacy and leadership.


Contents

The word is a variant of "controller." The "cont-" or "count-" part in that word was associated with "compt-", a variant of the verb "count." The term, though criticized by lexicographers such as Henry Watson Fowler, [1] is probably retained in part because in official titles it was deemed useful to have the title dissociated from the word and concept "control." [2]

A variant explanation is that comptroller evolved in the 15th century through a blend of the French compte ("an account") and the Middle English countreroller (someone who checks a copy of a scroll, from the French contreroule "counter-roll, scroll copy"), thus creating a title for a compteroller who specializes in checking financial ledgers. [3] [1] This etymology explains why the name is often pronounced identically to "controller" despite the distinct spelling. However, comptroller is sometimes pronounced phonetically by those unaware of the word's origins or who wish specifically to avoid confusion with "controller." [4]

A comptroller is a person in the business who oversees accounting and the implementation and monitoring of internal controls, independently from the chief financial officer in some countries. In the United States, the United Kingdom, Australia, Israel and Canada, a comptroller or financial comptroller is a senior position, reporting to the CFO in companies that have one.

In business, the title is typically spelled controller, [5] with government organizations only using the spelling comptroller. [6]

India Edit

In India, Comptroller is an appointment.

  • The Comptroller and Auditor General of India is the authority which audits all receipts and expenditure of the Government of India and the state governments, including those of bodies and authorities substantially financed by the government.
  • The Comptroller of the President's Household is responsible for the President of India's Household at the Rashtrapati Bhavan. The post is held by a Naval officer of the rank of Captain.
  • There are officers called Comptroller of the Governor's household in each state who are responsible for the Governor's households at the Raj Bhavans of each States and union territories of India.

Mexico Edit

In Mexico, the comptroller, translated as 'contralor', was established in the public administration during the presidency of Miguel de la Madrid, when he created the Secretariat of the General Comptroller of the Federation in 1982. This ministry was renamed as the Secretariat of the Civil Service by president Vicente Fox in 2003. Nevertheless, several states still name as General Comptroller Office their audit and oversight institutions. Namely, Mexico City has the Secretariat of the General Comptroller of Mexico City and Jalisco has the Comptroller General Office of the State of Jalisco.

United Kingdom Edit

The title of comptroller is used in the Royal Household for various offices, including:

  • the Comptroller of the Household (nowadays a sinecure, invariably held by a government whip in the House of Commons). The office was established as part of the Wardrobe (a powerful department of household and state) in the 13th century, in order to maintain a check on the accounts of the Treasurer of the Household. Today, the Comptroller's duties outside of government are minimal and mainly ceremonial.
  • the Comptroller of the Lord Chamberlain's Office, who is a full-time member of the Royal Household his duties are concerned with the arrangement of ceremonial affairs rather than financial affairs.

The Comptroller of the Navy is a post in the Royal Navy responsible for procurement and matériel.

The Comptroller and City Solicitor is one of the High Officers of the City of London Corporation, responsible for provision of all legal services. The post of comptroller dates from 1311, and that of City Solicitor from 1544 the two were amalgamated in 1945.

The Comptroller General of Patents, Designs and Trade Marks is the head of the UK Intellectual Property Office or Patent Office.


Why a Career at Office of the Comptroller of the Currency is the right move.

The Office of the Comptroller of the Currency (OCC) is consistently among the best places to work in the federal government. Among similar agencies, it ranks in the top 10 percent overall and ranks near the very top for diversity, family friendly culture, and pay and benefits. ​

Distinguished Mission

The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks. The OCC is an independent bureau of the U.S. Department of the Treasury. Link here to read more about our mission.

Diversity

The Office of the Comptroller of the Currency (OCC) values a diverse workforce and supports programs to help attract, develop, and retain the best talent that represents a cross-sector of the national populations. The agency is committed to ensuring equal employment opportunity to all job applicants and bases all employment and promotion decisions on merit, without regard to race, color, religion, national origin, sex, age, disability, protected genetic information, sexual orientation, parental status, or other non-merit factors. Click here to see more about how the OCC supports a diverse workforce.


Regulatory Arbitrage

The American system for chartering banks is a patchwork states still authorize banks alongside the OCC, and the FDIC has secondary authority for supervision &ndash the physical examination of bank records &ndash for all banks. Banks get to choose, a phenomenon called &ldquoregulatory arbitrage.&rdquo Bankers and their allies in government like to speak reverentially of this &ldquodual-banking system&rdquo &ndash neatly forgetting the wartime exigencies behind its creation &ndash but if all it does is give big banks greater room to maneuver, then let&rsquos dump it. Think for a moment if we created multiple court systems to ensure that bank robbers would have the option of swapping out a tough prosecutor for a more friendly one. Would bankers be so enthusiastic?

In 2004, JPMorgan Chase, now the largest U.S. bank by assets, and HSBC both abandoned their New York charters in the wake of federal rules that expanded the reach of state laws on predatory lending. More recently, Cincinnati-based Fifth Third swapped its Ohio authorization for the OCC in 2019, the sixth firm to do so under Trump&rsquos industry-friendly Comptrollers. Another was the U.S. affiliate of Mitsubishi UFJ, which was under investigation by New York regulators, who had to abandon their probe once the OCC became the chartering authority. A vital variable: when the banks switch to the OCC, they then pay dues to that agency, further reinforcing its power.

This ability to attract banks by offering more lax supervision and friendly rules&mdashOtting openly referred to banks as his &ldquocustomers&rdquo rather than his charges&mdashgives the OCC the power, among federal banking regulators, to drive the agenda for all of them. Wilmarth, a longtime critic of the OCC, sketches out in his new book, Taming the Megabanks, how the agency effectively forced other regulators to allow banks into the wild-and-wooly derivatives market and stifled early attempts to crack down on shady mortgages. Previous comptrollers have then sped through the revolving door. John Dugan was a Republican staffer in the U.S. Senate who became OCC head under George W. Bush he&rsquos now the chairman of Citigroup. OCC examiners regularly exit to work for the banks they oversee.

The OCC enables financial consolidation at a time when we need a whole-government approach to shrinking these behemoths. The five largest U.S. banks &ndash JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and U.S. Bank, hold about 38 percent of all deposits. The Financial Services Forum, a lobby group compose of CEOs, likes to brag that its eight members handle three-quarters of all debt and equity underwriting. The OCC also has a long history of using its powers of preemption &ndash the ability to override state laws &ndash to undermine consumer protection laws. (Noreika, relying on OCC rules, successfully sued states on behalf of big banks to stop regulation of ATM fees.)

And the big banks remain, contrary to all that&rsquos been done in the last ten years, still enjoy an implicit guarantee from the federal government that they&rsquoll be bailed out in the event of another financial crisis. They are still too big to fail, as former Treasury Secretary Tim Geithner, no pitchfork populist, admits.

Advocates for big financial institutions seldom have much of an argument for why bigness is itself good. Sure, you might get lower ATM fees if you want to get cash in Paris, but that&rsquos a contractual arrangement not intrinsic to large banks, and, in an era of credit cards and Apple Pay, it sounds like a hoary pitch for traveler&rsquos checks. Paid shills will rattle off statistics about how large banks dominate lending to the small as though that&rsquos a virtue. Why endorse that kind of power imbalance?


Yellen to name Michael Hsu as Acting Comptroller of the Currency

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U.S. Treasury Secretary Janet Yellen announced her intention to appoint Federal Reserve bank regulator, Michael Hsu, as acting Comptroller of the Currency Friday.

Hsu currently serves as associate director of the Fed’s bank supervision and regulation division. Yellen will appoint him to the role of first deputy comptroller, after which he will assume the role of acting comptroller of the currency.

“Mike has devoted his career to the stability and supervision of America’s banking system,” Yellen said in a statement. “He is among the most talented and principled regulatory officials that I have had the pleasure of working with, and I am confident he will execute this role with integrity and efficiency.”

The Office of the Comptroller of the Currency is an independent unit of the Treasury Department that oversees federally chartered banks, including Goldman Sachs Group Inc. GS, -2.59% Wells Fargo & Co. WFC, -1.91% and Bank of America Corp. BAC, -2.41%

The regulator has been the subject of recent controversy, after current Acting Comptroller of the Currency Blake Paulsen wrote to lawmakers last month defending a rule that enables nonbank companies to partner with national banks to issue loans, a policy that critics say enable predatory lenders to evade state laws capping interest rates.

The so-called “true lender” rule was finalized in the final months of the Trump administration, and Democratic lawmakers have been working to overturn the regulation through the Congressional Review Act.

The cryptocurrency industry is also watching developments at the OCC closely, after the agency, under the Trump administration, developed a new fintech banking charter that could enable crypto firms to offer lending and payment products and offered guidance that gave the go ahead to nationally chartered banks to offer cryptocurrency custodial services.

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What Is ‘The Comptroller Of The Currency’ – And Why Does It Matter?

A USD $10,000 Federal Reserve Note from 1934 is displayed at the US Bureau of Printing and . [+] Engraving (BEP) August 27, 2012 in Washington, DC. The note has the image of Salmon P. Chase, who was US Secretary of the Treasury under 16th US president Abraham Lincoln. Bills larger than USD $100 were discontinued with the end of the 1934 series, though printing actually continued until 1945, all dated 1934. AFP PHOTO/Paul J. Richards (Photo by Paul J. RICHARDS / AFP) (Photo by PAUL J. RICHARDS/AFP via Getty Images)

President Biden and Vice President Harris have made most of their cabinet picks now. There remains at least one important decision, however, that remains to be made. I refer to the Office of the Comptroller of the Currency (‘OCC’), often described as a ‘bank regulator’ housed within Treasury.

There is a sense in which the OCC is a ‘bank regulator.’ S/he does license our nationally chartered banks, after all (which must not, as I’ll argue, include unproductive fintech ‘shadow banks’), and plays a critical role in determining what’s held in our banks’ investment portfolios. But in fact the office is much more important than contemporary understandings of the word ‘regulation’ tend to suggest.

Indeed, the Comptroller’s role – not to mention the office’s very name – tells us a great deal about how our banking and monetary systems work, and hence what’s at stake when we fill the office. It behooves us to highlight those lessons here, as the President and Vice President consider prospective next Comptrollers.

Let’s start with the word ‘comptroller’ itself. This is just 19 th century English for ‘controller.’ The ‘Comptroller of the Currency’ is a currency controller. But now, what’s that got to do with mere ‘bank regulation’? Why would a bank regulator be a currency controller?

Addressing this question takes us deep into just how our monetary system works, and this in turn highlights both great risks and great opportunities when it comes to the choice of a Comptroller. While I have written on all of this at great length in long scholarly works (e.g., here and here), the time is now ripe to provide an accessible short-playing version.

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Let us turn next, then, to what banks have to do with our currency. This will equip us to understand what bank regulation has to do with currency control…

To understand what banks have to do with currency, you have to know what they have to do with money. And here the key point is that banks issue money. They ‘create’ it, in a critical sense, and are explicitly licensed to do so insofar as they lend. (As the old adage has it, ‘loans make deposits.’) Here’s how it works …

You go to a bank for a loan to finance a remunerative project – a project you’re sure will be profitable. You need purchasing power to purchase your project’s inputs, but all that you have is your own private promissory note – your ‘IOU,’ your ability to borrow and pay back what you borrow.

Your promissory note is not legal tender – it’s not recognized money – hence cannot be used directly to purchase your project’s inputs. So you go to the bank to exchange it – to swap it – temporarily for public promissory notes, i.e., ‘dollars.’ These do count as legal tender – as money – and hence purchasing power usable to finance what ever project that you need the money to start up.

But wait, you now ask – dollars are public promissory notes? Yes. Look at a dollar, read across the top. A dollar is a Federal Reserve Note – a ‘note’ as your promissory note is a note. But it is more widely usable. For it also is legal tender – good for ‘all debts, public and private,’ as another inscription on your dollar bill puts it. That is the sense in which it is moneypublic money.

The bank is going to evaluate your proposed project before approving your proposed swap. It wants some assurance that you will be able to ‘swap back’ with interest – that is, to repay the debt once it’s due.

If the bank approves your swap application, it is going to trade for your promissory note not quite literal public promissory notes – dollar bills – but what used to be called their fiduciary equivalent. It is going, in other words, to open an account in your name, credit an account already there in your name, or provide you a check – another variant on our old friend the promissory note – that instructs someone else to credit you.

Now for the kicker: you can immediately spend this credit – it is monetary from the get-go, requiring no antecedent accumulation of gold in a sack, bills in a vault, or whatever. You simply insert a chip, swipe a strip, or key a blip and you’ve paid for the inputs to your bank-financed project, be they machine tools for a productive project or a ticket to Vegas with a surefire way of beating ‘the house’ as a speculative project (we’ll come back to that).

What makes this possible – what makes it a private note / public note swap – is that the bank is a publicly licensed institution networked into our national payments system. At the center of that system sit … wait for it … our ‘central bank’ and the authority that licenses our private banks. In the US, those are the Fed and the Comptroller of the Currency, twinned public instrumentalities that charter and oversee our money-issuing banks.

But how can bank credit be money, I now here you asking? Well, a functioning money is just ‘that which pays’ in a payments system – ‘that which counts’ in a system of debit and credit and value accounting. And it is we, the public, who legislate what shall pay, what shall count, and who shall disseminate it when we generate it, ex nihilo, through public-private note swapping. The currency is simply that ‘what,’ and the banks that we license are simply that ‘who.’

Portrait of Knut Wicksell (1851-1926) Swedish economist. Dated 20th Century. (Photo by Universal . [+] History Archive/Universal Images Group via Getty Images)

Universal Images Group via Getty Images

Now, this form of publicly recognized, ‘monetized’ bank credit changes everything where money’s concerned, and has done for centuries. Its analysis lay at the core of the work of the greatest economist you’ve possibly never heard of, Sweden’s Knut Wicksell (1851-1928), who called this stuff ‘bank money.’

And that is the link between banking and money, hence between bank regulation and currency control, and hence between Comptroller and Fed. The Fed determines what ‘counts’ as money, and in so doing counts ‘bank money’ as money. The Comptroller for its part determines what counts as a bank, hence who qualifies to issue this Fed-recognized bank money.

OK, so how did we get here? What is the backstory? It’s more interesting than you might expect, particularly thanks to its origins in a period we’re now rediscovering in this country – the Civil War and the post- Civil War Reconstruction.

A key feature of ‘the dollar’ in the early days of our republic is that for most of our early years it was primarily a unit of account rather than a medium of exchange (a currency). The U.S. Mint minted coins, the Treasury issued some paper and the First and Second Banks of the U.S. issued some paper as well from the 1790s to the mid-1830s. But paper money – the ‘notes’ just described – were issued primarily by multiple state-chartered banking institutions. Hence the term ‘bank notes’ for most paper currencies that circulated at the time.

Bank notes were denominated in dollar increments, but were not sovereign-issued liabilities like today’s dollar bills. Banks’ notes were their own liabilities – hence liabilities of private issuers. And different issuers were differently reliable. Two banks might both promise redeemability of their notes into the same quantum of something more solid – gold, for example, or U.S. Treasury certificates – but prove differently able to live up to their promises at different times.

The upshot of this ‘Banking Babel’ was that the nation’s currency supply consisted in hundreds or thousands of distinct bank notes all trading at various discounts to stated par at various times. A dollar note issued by Billy the Kid Bank or Sidewinder Bank might trade at 50% of par, for example. A dollar note issued by Wyatt Erp Bank or Bald Eagle Bank might go for 90% of par or even full par. And any might change over time.

Needless to say, this private banknote money did not make for an optimal payments system. It was good that the nation had a unit of account – the dollar – but it still lacked a widely usable national currency.

This changed in the 1860s. The Civil War threw up two factors that made something resembling a spatially and temporally uniform national currency possible. The first was that the stresses of war made a single and stable currency more clearly necessary than ever before. To prosecute the war over both time and space the federal government had to be able to spend its own currency whenever and wherever in the union government operations were necessary. The second factor was that the southern slave states, which had always been the primary objectors to national banking and monetary uniformity, were conveniently unrepresented in Congress during the war years – they were the ones trying to secede.

The First Reading of the Emancipation Proclamation Before the Cabinet, mezzotint by Alexander Hay . [+] Ritchie after a painting by Francis Bicknell Carpenter, 1866. Shows Abraham Lincoln signing the Emancipation Proclamation on July 22, 1862 at the White House. Shown, left to right, are Edwin M. Stanton, Secretary of War, Salmon P. Chase, Secretary of the Treasury, President Lincoln, Gideon Welles, Secretary of the Navy, Caleb B. Smith, Secretary of the Interior, William H. Seward, Secretary of State, Montgomery Blair, Postmaster General, and Edward Bates, Attorney General. Simon Cameron and Andrew Jackson are featured as paintings. (Photo by VCG Wilson/Corbis via Getty Images)

The upshot was that Congress passed several mutually complementary pieces of banking and currency reform legislation, culminating in the Legal Tender Act of 1862, the National Currency Act of 1863, and the National Banking Act of 1864, all sponsored by Congressional Republicans and signed into law by Republican President Abraham Lincoln. These Acts together established a system of federally chartered ‘National Banks,’ located all over the nation, all issuing notes convertible into the very same Treasury-issued currency. The latter was called, tellingly, the ‘Greenback.’

The banking and currency acts of the 1860s transformed our interlinked banking, financial, and monetary systems. In very short order there were federally chartered banks in most states and territories of the Union, all of them subject to uniform quality control (‘Comptrol’?) standards – including that every $100 in notes be backed by $111 in sovereign bonds – and all of them accordingly issuing a uniform currency. These banks could also sell U.S. Treasury securities, effectively making of them a system of outlets for issuance of both of our federal government’s principal circulating liabilities – Greenbacks as monetary instruments and T-Bills as fiscal instruments.

The administrator of the new national banking system was … well, you already know. It was the Comptroller of the Currency – the subject of this column. The OCC remains to this day one of our principal bank overseers, precisely because our banks still issue most of our money. It is the chartering authority for our national banks, administers those banks’ portfolio-regulatory regimes, and has final word on whether a national bank has gone bankrupt in such manner as engages the orderly liquidation and depositor reimbursement processes prescribed by the Federal Deposit Insurance Act promulgated some 70 years after the 1860s banking and currency enactments.

The OCC now shares jurisdiction over the national currency, however, in a way that it didn’t during its first fifty years. That is because, by 1913, we as a nation had come to realize that a healthy economy needs more than a uniform currency. It also needs what is known in the discipline as an elastic currency.

An elastic currency is a currency whose supply can be adjusted (a) to accommodate, while not over-accommodating, transaction and credit demand, and (b) to counteract sudden credit expansions or contractions. The idea is to maintain just enough bank-money supply to accommodate desired transaction volumes and enable productive investment, so as not needlessly to squelch either, while at the same time preventing over-issuance of the sort that can spark inflation – the classic problem of ‘too much money’ chasing ‘too few goods.’

A money whose supply can be ‘modulated’ in this way, as I’ve written elsewhere, is essential if we’re to avoid needlessly disrupting either transaction activity, investment activity, or currency value. And that is to say it’s essential if we would maintain smooth, steady growth of our nation’s real wealth and productive capacity.

The OCC and Treasury more generally were not well equipped, operationally or transaction-technologically speaking, to engage in this daily ‘money-modulatory’ task that an elastic currency requires. The Second Bank of the U.S. from 1816 to 1836, and especially central banks of the kind found all over the ‘developed’ world circa 1913, by contrast, had shown themselves well suited to the task. By acting as ‘banks to the banks,’ these institutions were able to modulate private bank money-issuance in ever more ‘fine-tuned’ manners, using ‘carrots’ as effectively as ‘sticks.’

The U.S. accordingly established its version of a central bank, patterned partly on European development bank models and partly on private clearinghouse arrangements among private banks that had emerged in New York and New England, with the Federal Reserve Act of 1913. Like the banking acts of the 1860s, this change too was proximately occasioned by a crisis – in this case, the panic of 1907.

The main entrance to the Marriner S Eccles Federal Reserve Board Building, Washington DC. Image . [+] courtesy US Federal Reserve, 2011. (Photo via Smith Collection/Gado/Getty Images).

The Federal Reserve Act (‘FRA’) of 1913 established the Fed that we all know today, and transferred daily fine-tuning of the national money supply from the Comptroller to this new entity. This is why the ‘Greenbacks’ you now find in your pocket call themselves, not ‘Treasury Notes,’ but ‘Federal Reserve Notes’ – though these are tellingly signed by the Treasury Secretary as well as inscribed by the Fed.

All right, so why does this matter right now? Well, it’s actually quite simple. As I and many others have been arguing since spring, our nation now needs reconstruction on an order of magnitude not seen since the Civil War era – precisely the era that gave us our national money and the national banks that issue that money in the first place. We are going to have to issue and spend a lot of that money in order to rebuild. But to ensure that the new money flows to rebuilding, and doesn’t merely inflate, we are going to have to control – or should I say ‘Comptrol’? – its flow.

That’s where the Comptroller, the OCC, comes in…

As I have written in prior columns here, the Fed plays a critical role in ensuring that money flows productively, not merely speculatively, by deciding what loans to monetize through its Discount Window. If it swaps dollars for unproductive Wall Street financial instruments, it squanders productive opportunity and risks stoking inflation – asset price ‘bubbles’ – in our financial markets.

If instead we ‘Spread the Fed’ across all of the Regional Federal Reserve Banks, lending for projects on Main Streets nationwide rather than only on Wall Street in Lower Manhattan, then we will fuel real production – construction and reconstruction – and not inflation. In this sense we must ‘Spread the Fed.’ It’s the only way that our next Reconstruction can work.

UNITED STATES - AUGUST 02: Alexander Hamilton statue in front of the Treasury Building in . [+] Washington, D.C. (Photo by Carol M. Highsmith/Buyenlarge/Getty Images)

But the Fed has a partner. That is the OCC – its older sister or brother, so to speak. For again, the Comptroller both determines what institutions receive banking charters entitling them to Fed lending access, and oversees bank investments – that is, bank lending decisions. And this means the Comptroller is perfectly situated to work with the Fed in ensuring that our public money flows only to publicly beneficial, truly productive and reconstructive, not merely profitable and hence possibly speculative, investment projects.

Let us encourage, then, President Biden and Vice President Harris to keep this in mind as they choose a new OCC. Our Comptroller is no mere bank ‘regulator.’ It is a currency controller – and that means it co-directs currency flows. Let us ensure that our currency flows now to true reconstruction.


Watch the video: Comptroller Otting Describes Benefits to Low and Moderate Income Communities from a Modernized CRA