This post is part of Notice & Comment’s symposium on Peter Conti-Brown and Sean Vanatta’s Private Finance, Public Power: A History of Bank Supervision in America. For other posts in the series, click here.

Private Finance, Public Power, by Peter Conti-Brown and Sean Vanatta, is a contribution to the history of the administrative state, in addition to the history of bank supervision promised in the book’s subtitle.[1]  Recounting the early history of the Office of the Comptroller of the Currency (OCC), Conti-Brown and Vanatta show that this important administrative agency for all practical purposes created itself, taking the bare-bones legislation enacted by Congress and layering upon it the flesh and blood that gave the office its form.  Congress housed the agency in the executive branch (in the Treasury Department) and provided that its single-person head, the comptroller, would be appointed by the President, subject to Senate confirmation.  But the agency was effectively independent.  The only one of the three major branches of government with which it had significant dealings was the Congress.  Otherwise, it operated with little or no oversight from either the President or the courts. Contrary to the modern theory of the unitary executive, the statute that created the OCC (the National Currency Act of 1863) constrained the President by specifying that the comptroller would serve for a five-year term “unless sooner removed by the President, by and with the advice and consent of the Senate.”  A revision of the statute in 1864 softened the check on the President somewhat, so that the clause read “unless sooner removed by the President, upon reasons to be communicated by him to the Senate.”  Both statutes were signed into law by President Abraham Lincoln.[2]

Most of the substance of the two National Currency Acts concerned the statutory requirements for national bank charters and the conditions that banks would have to meet to be able to issue currency.  The comptroller was given responsibility for assessing applications for charters and for vouchsafing the soundness of the currency, but the statutes contained little detail about how he should organize his office or go about performing these tasks.  He was to have a “competent deputy” appointed by the Secretary of the Treasury and “shall employ, from time to time, the necessary clerks to discharge such duties as he shall direct.”  He might also “as often as shall be deemed necessary or proper … appoint a suitable person or persons to make an examination of the affairs of every banking association.”[3]  On this weak foundation, Conti-Brown and Vanatta show, the first comptrollers built a sprawling bureaucracy that consisted of a permanent staff of examiners dispersed across the country’s financial centers and a small army of clerks housed in the treasury building in Washington, D.C.  Congress signaled approval of these initiatives by appropriating the necessary funds.

Under the Currency Acts, bills issued by national banks had to be backed more than 100 percent by U.S. government bonds.  In theory, the comptroller’s duty to secure the currency could have been fulfilled by checking that the requisite bonds had been submitted and that the amount of currency issued by the bank did not exceed the statutory ceiling of its total paid-in capital.  However, the early comptrollers recognized that their mission, to be successful, had to be interpreted more broadly.  Conti-Brown and Vanatta quote Comptroller Hiland R. Hulburd (1867-1872) as insisting that the business of issuing currency was so intertwined with the business of lending that “it is impossible to apply safeguards to the currency, without applying prudence and reasonable restrictions to the business of lending” (p. 53).  To ensure that bankers behaved prudently, the early comptrollers transformed bank supervision from the occasional check implied by the National Currency Acts into a permanent activity.  Developing printed forms that became increasingly elaborate over the next several decades, they focused examiners’ attention on assessing the quality of banks’ loan portfolios rather than on simple conformity with the provisions of the Acts.

As Conti-Brown and Vanatta point out, the Currency Acts did not give comptrollers the enforcement tools they needed to ensure that bankers corrected any deficiencies the examinations uncovered.  Comptrollers could apply moral suasion, especially by bringing problems to the attention of the banks’ boards of directors, but banks might nonetheless refuse to take remedial action.  Comptrollers also had a nuclear option—revocation of a bank’s charter—but that remedy was too drastic to be used for all but the most serious cases of insolvency.  Short of revocation, the Currency Act of 1864 allowed the comptroller to appoint a receiver for a bank if it “refused to pay its circulating notes” (p. 57), but it did not provide for a similar remedy in the case of a bank that continued to redeem its currency but was found by examiners to be insolvent.  Neither did the Act explicitly prohibit such a step, however.  When comptrollers took advantage of the statute’s silence to forge ahead and put insolvent banks into receivership, the courts upheld their discretionary use of their powers.  Congress then followed up in 1876 with new legislation that empowered the comptroller to appoint a receiver whenever he “shall become satisfied of the insolvency” of a bank.  As the Supreme Court later declared, the comptroller’s discretion in judging whether a bank was insolvent was “final, and not reviewable by the courts” (p. 58).  

For all their creativity, comptrollers were helpless in the face of the crises that periodically disrupted the banking system in the late-nineteenth century.  In the first place, the OCC was not a central bank and had no balance sheet that might enable it to function as a lender of last resort or to influence monetary policy in any way.  Second, the crises that afflicted the U.S. economy were to a large extent the result of flaws that Congress had baked into the National Currency Acts by concentrating the banking system’s reserves in a small number of large New York banks and by creating a currency so inflexible that every harvest season inflicted a period of monetary stringency that threatened to degenerate into panic.  Fixing the underlying problems would take a long time and would involve the creation of the Federal Reserve System in 1913, the establishment of the Federal Deposit Insurance Corporation (FDIC) in 1933, and the restructuring of the Federal Reserve System in 1933 and 1935, among other developments. 

Both the Federal Reserve banks and the FDIC acquired supervisory responsibilities at the time of their creation, and, as Conti-Brown and Vanatta discuss, the ensuing decades brought clashes among these new agencies and the OCC over policies and turf—conflicts that drive the narrative in the second half of the book.  Their account of regulatory rivalry is an important contribution in its own right, but it should not obscure the central insight of the earlier chapters: that is, that bank supervision was, for all practical purposes, the invention of the OCC.  Facing the daunting task of creating a national currency and keeping it sound, the OCC’s first comptrollers took the meager language of the National Currency Acts, created a staff of clerks and examiners, and developed the practice of bank examination by trial and error. Congress and the courts ratified the OCC’s actions ex post.  Presidents appointed the various comptrollers, but otherwise scarcely figure in Conti-Brown and Vanatta’s story before the growth of regulatory competition in the twentieth century.

The history of other administrative agencies established in the nineteenth century followed much the same pattern of self-invention and ex post ratification.  Whether the subject is the Patent Office (1836), the Board of Supervising Inspectors (of steamboats, 1852), or the Bureau of Animal Industry (1884), the story is one in which Congress recognized a pressing problem (soaring patent litigation, exploding steamboats, rampaging animal diseases) and created an administrative agency to solve it, but otherwise provided little in the way of guidance or tools.[4]  As at the OCC, the people who staffed these agencies developed remarkably effective solutions to the practical problems they confronted as they struggled to implement the legislation that established them.  These are stories from which the executive authority of the President is largely absent. They are stories about how administrative agencies built themselves from scratch, from the ground up, and how the other branches of government deferred to their achievements. 

There is no implication in any of these accounts that the bureaucracies that developed in this way were in any sense optimal.  Indeed, to underscore this point, Conti-Brown and Vanatta originally planned to call their book “The Banker’s Thumb” in homage to Stephen Jay Gould’s theory, in The Panda’s Thumb, of how evolutionary processes can lead to imperfect but nonetheless workable outcomes.[5]  What these histories do suggest, however, is that the theory of the unitary executive is based on a misunderstanding of the constitutional principles that underpinned the early administrative state.  To the extent that the Supreme Court forces federal agencies to restructure in conformity with this invented theory, it may well destroy their hard-won workability.

Naomi R. Lamoreaux is Stanley B. Resor Professor Emeritus of Economics and Professor Emeritus of History at Yale University, Senior Research Scholar at the University of Michigan Law School, and a Research Associate at the National Bureau of Economic Research.

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[1] Peter Conti-Brown and Sean H. Vanatta, Private Finance, Public Power: A History of Bank Supervision in America (Princeton, NJ: Princeton University Press, 2025).  Hereafter citations to pages in this book will appear parenthetically in the text.

[2] “An Act to provide a National Currency …” approved 25 Feb. 1863; and “An Act to provide a National Currency,” approved 3 June 1864.  So far as I know, there is no systematic study of the extent to which Congress placed constraints on the President’s removal powers in statutes enacted between 1789 and the passage of the Tenure of Office Act in 1867.  The latter act, which was passed over the veto of President Andrew Johnson, required “the advice and consent of the Senate” (the same language as in the Currency Act of 1863) for the President to remove the Secretaries of State, Treasury, War, Navy, and Interior, the Postmaster General, and the Attorney General.  For a nuanced account of early American concepts of executive power, see Nathaniel Wald Donahue, Officers at Common Law, 135 Yale L.J. ___ (forthcoming 2026).  For an analysis of restrictions on the President in statutes enacted from 1863 to 2010, see Jane Manners and Lev Menand, The Three Permissions: Presidential Removal and the Statutory Limits of Agency Independence, 121 Colum. L. Rev. 1 (2021).

[3] The quotations are from the 1864 act.

[4] See Rebecca Eisenberg and Naomi Lamoreaux, “Separation of Powers or Division of Labor:  Efficiency and Fairness in the Resolution of Patent Interference Disputes, 1836-1940,” unpublished working paper (2025); Jerry Mashaw, Creating the Administrative Constitution: The Lost One Hundred Years of American Administrative Law (New Haven, CT: Yale University Press, 2012); Alan L. Olmstead and Paul W. Rhode, Arresting Contagion: Science, Policy, and Conflicts over Animal Disease Control (Cambridge, MA: Harvard University Press, 2015).

[5] Stephen J. Gould, The Panda’s Thumb: More Reflections on Natural History (New York: W. W. Norton, 1980).