The Origins of Federal Bank Supervision and Supervisory Discretion, 1863-1875

American political historians have long seen the Civil War as a watershed moment for the American state, when governance through “courts and parties” began to give way to the Yankee Leviathan—to a new and more assertive federal bureaucracy. The Comptroller of the Currency, who oversaw the new national banking system beginning in 1863, was central to this transformation. Yet, while the early Comptrollers built a federal banking system and a bureaucracy to oversee it from scratch in the mid-1860s, so far this effort has eluded sustained scholarly attention. This paper, part of a larger project on the history of federal bank supervision, will begin to fill that gap. It will argue that although Congress provided a scanty and constrained blueprint for the office of Comptroller, its first occupant, Hugh McCulloch, nevertheless developed an activist oversight institution around a moral vision for federal financial governance. Drawing on the early records of the Comptroller, along with examination reports and examiner diaries, it will show the ways McCulloch empowered clerks in Washington and examiners in the field to monitor bankers and ensure they were pursuing what he called a “straightforward, upright, legitimate banking business.” As the paper will show, this phrase embraced an idealized set of business practices, which would ensure the successful operation of a bank in the public interest. In pursuing this vision, McCollough went far beyond the limited construction of his powers under the National Bank Acts, inscribing the judgement and discretion of government officials as core tenants of what would become federal bank supervision. Arguably, these remain central down to the present.