When students ask me how to get into the world of banking, I often tell them, "Become a bank examiner."
Riggs' and La Salle's hiring of their lead OCC examiners has given this career strategy a black eye lately, but there should be some way to prevent conflicts of interest without closing it off. Anyway there's less chance of such conflict at community banks, which don't get their own full-time examiners.
Many top bankers got their start, and a world of education, in the examination departments of federal and state regulatory agencies. There is a good reason for that: Bank examiners need to know nearly everything bank officers know, as well as whether those officers are doing a good job.
The old view that examiners walk in unannounced, take over the bank, and start from the bottom, counting the cash to see if it matches reports, is patently not true today. Bank examiners now set up appointments, and when they do arrive they have far more important issues to concern themselves with.
As one banker put it to me in discussing the procedures adopted in the past decade: "Bank examination today is like a man's first physical after reaching age 40. It probes things you didn't even know existed."
Yet some bankers say there is still a lot lacking. They are especially unhappy with how some examiners handle the Community Reinvestment Act evaluation.
Too much scrutiny of paperwork, they say; too little consideration of whether the community's real needs are being fulfilled. For example, they say, regulators complain of a lack of loans to improve substandard housing in communities where there isn't much substandard housing to improve.
These bankers say they'd appreciate examiners' using a little more common sense and not working so hard to cover their rumps.
But though bank examination has been modernized, veteran examiners still like to tell the stories of what life was like when they cut their teeth in the service.
These men and women knew their business cold.
I remember the time I was to meet Charles Van Horn, then the head of the entire New York-New Jersey region for the Office of the Comptroller of the Currency. We were to meet in Union, N.J., near the turnpike, so we could ride together down to a South Jersey meeting.
"I will meet you in the lobby of the First State Bank of Union," I said.
"Never heard of it," Chuck replied.
How stupid of me, I thought; a state bank. "How about the Union Center National Bank?"
"I know every rivet," Chuck said.
One examiner was fazed, however, I was told, when he looked at the report of a bank he was to examine and saw the statistic: Vault cash $00.00
He called up in panic. "You have to have cash!" he screamed.
"Oh, we have cash," the banker replied. "We just don't have a vault."
One pattern I learned was that the more comfortable the bank made the place where the examiners worked, the longer the audit lasted. Realizing this, banks began to put examiners in hard chairs in rooms with minimal air-conditioning and a long way from the rest room. The improvement in exam speed was amazing.
Here is my favorite exam story:
One morning, exactly at 8:30, national bank examiners walked into a bank unannounced, took over the files, and started counting the cash.
Half an hour later, the head of the exam realized they were in the wrong bank - a state bank. They were supposed to be in the national bank across the street.
The head examiner thought fast. He announced to the bank officers and examiners involved, "We will have a meeting at 9:15 of all officials involved in the audit."
When they assembled he announced: "This was a test. We are national bank examiners, and you are a state bank that let us in without examining our credentials.
"We are leaving immediately - but we are reporting you to the proper state bank authorities."
Mr. Nadler, an American Banker contributing editor, is a professor emeritus of finance at Rutgers University Graduate School of Management in Newark, N.J.
