Whether the new national banking system succeeded or failed depended heavily on the supervision of individual national banks. That job was largely the responsibility of the Comptroller’s examiners, who moved from one institution to the next, making sure the bank’s business practices conformed to the growing body of law and regulation governing their behavior.
The job of the national bank examiner in the nineteenth century was probably most difficult in the states and territories of the American West. In traveling to remote locations they were at the mercy of railroad connections that were slow and erratic, that could leave them stranded for days, and make it easier for bankers to anticipate, and prepare for, their arrival. In the classic O. Henry short story, “Friends in San Rosario,” the “friends” were competing Texas bankers who by pre-agreement moved assets between them, enabling them to present a misleadingly healthy face to the story’s examiner.
A related problem was that as one traveled from more to less settled areas, the law had less presence and less force. Where they were in conflict, community sentiment sometimes trumped written law. Communities with fewer banks naturally relied on them more heavily, and there was likely to be more resistance to supervisory action requiring a bank to curtail lending or, worse, to suspend its operations. Examiners had to be mindful of that reality.
In this essay, Paula Petrik, who teaches history at George Mason University, looks at just such a community: Helena, Montana in the 1890s. Her story of OCC bank examiner E.T. Wilson shows what it took in the way of resourcefulness to deal with boomtown banks under erratic, if not dishonest, ownership. Petrik’s story, drawing on a wide variety of both local and federal documents, is one of few that focuses on the human dimension in overseeing the national banking system.
April 21, 2016