1936 - 1966

Stabilization & Challenge

World War II, with its insatiable demand for manpower and material, signaled the end of the Great Depression. National service pulled many bank examiners off the front lines of supervision and moved them to the front lines of combat, which meant increased responsibility for the remaining staff. Fortunately, with the newly restrictive regulatory framework and the emphasis on lending to government rather than individuals, bank safety and soundness was never compromised.

After the war, consumer spending and borrowing grew briskly. With relatively few new banks being chartered, national banks could be extremely selective about those with whom they did business and how much they charged customers for their services. Loan losses were low, bank failures were practically nonexistent, and banks were profitable.

Stability in the banking system eased the pressure on OCC examiners. The interstate highway system and air-conditioned cars made travel more comfortable, and the team approach to examination bred camaraderie and esprit de corps.

These relatively tranquil days for the national banking system—and those who were responsible for it—were fleeting. Competition arose from financial providers that were not commercial banks and were therefore not subject to Glass–Steagall restrictions. By the early 1960s, a century after the national banking system began, James J. Saxon, the 21st Comptroller, was issuing warnings about the "spectre of over-regulation" that threatened to erode the system's future strength and relevance.

Saxon was among the most innovative and assertive Comptrollers in OCC history, but his legacy was mixed. Some of his key regulatory initiatives, one of which permitted national banks to underwrite revenue bonds for state and municipal governments, were later overturned in court. His muscular assertion of the Comptroller's independence produced a backlash: By the time he left office, the OCC's relations with the Fed, the FDIC, and the Treasury Department were all seriously strained.

His reforms, however, were significant and their effects lasting. He set up an OCC international banking unit; created an economics department, which he staffed with graduate-level economists; and strengthened the law department, which he kept busier than ever. He raised hiring standards for new examiners, who for the first time were required to hold college degrees. He encouraged national bank expansion into new geographic and product areas, liberalized chartering policies, and aggressively promoted the national charter to state banks. Saxon's policies helped reinvigorate the national banking system and improved the OCC.