Don Stephens: Making Trust A Key Part of OCC Supervision

Early in 2007, Don Stephens will have called it a career after 43 years of OCC service. He witnessed a lot of history and a lot of change in what became his specialty: examining national bank trust departments. And he won a lot of respect and admiration from bankers and his peers along the way.

When Don came on board in 1963, trust supervision was in the midst of a transformation. James J. Saxon was the Comptroller, and the advisory committee he commissioned to review the national banking system and the rules governing focused heavily on necessary changes in national bank trust powers.

Among the committee's most far-reaching recommendation was that the trust activities of national banks, which were then overseen by the Federal Reserve Board, should be supervised by the OCC. Legislation enacted in September 1962 accomplished this transfer.

To carry out its responsibilities, the OCC reorganized and enlarged its trust division. The examination of trust departments was separated from and placed on parity with commercial department supervision. Dean Miller was appointed to the newly created position of deputy comptroller for trusts. A revision of the trust examination report form and the Manual of Instructions to Trust Examiners—known fondly as the "White Rat" (not to be confused with the commercial "Brown Mouse")—were completed. And a vigorous recruitment program was launched to attract young law school graduates to OCC careers as trust examiners.

Don Stephens, a young lawyer toiling away in the district attorney's office in a small Texas town, decided to take the plunge. He had enjoyed his law school course work in trusts and estates, and figured that the OCC offered a chance to make an interesting career of it. So he completed the paperwork, took the oath of office, and headed up to Washington to meet his new colleagues and get marching orders from his bosses.

Don never forgot the scene that day. All the newcomers assembled in the Secretary of the Treasury's newly refurbished conference room over at main Treasury, where the OCC's offices were then located. The rug was thick and plush, and still had that new- carpet smell. Even Comptroller Saxon, who stopped by to greet his young charges, stashed his trademark cigar for the occasion. But one new examiner walked in carrying a cup of coffee, which he promptly spilled while opening the door. "That was it for meetings in that sacred spot," Don recalled.

Don knew that the examiner's life required mobility—it was one of the things that attracted him to that life—but he had no reason to think that his first move would occur so soon. Signing on in Dallas, he was immediately transferred to Cleveland. That was only the first of many relocations to follow. Indianapolis, Louisville, Lexington, New Orleans, Memphis, and, finally, Jacksonville, were among the OCC cities that Don came to call home. He enjoyed them all.

Not that he actually spent much time in any of those places. Being an OCC examiner—and this was equally true for trust and commercial examiners—meant living out of your suitcase and your car, going straight from bank to bank. During Don's first years of service, he never saw a duty station; and when he finally did see one, he realized that he hadn't missed much. "Some were no more than large closets with storage for supplies," he recalled. "No equipment, no phones." By that time, he had already learned the drill: exam reports were pounded out on portable Royal typewriters from the backseat of the car. Laptops were decades off.

The travel was an incentive for Don, but he and his colleagues certainly weren't in it for the money. His starting OCC salary was $4800. Expense reimbursements were low, cash advances hard to come by, and vouchers not infrequently rejected. Driving through a snowstorm, Don checked in to the only motel in town, whose one vacant room was big enough to accommodate six. For that reason, he was denied reimbursement.

None of this bothered Don much. One thing that did bother him, however, was having to justify the hourly charge for his services to the banks he examined. Long after commercial supervision was funded through assessments, OCC trust examinations were still billed separately. That meant having to present the banker with an invoice at the conclusion of the exam—and having to listen to snide comments about the examiners' coffee breaks and phone calls. Yet, as Don recalled, that kind of scrutiny had a positive effect: it kept trust examiners focused on their work and promoted efficiency.

Ending this arrangement and putting trust and commercial exams on a common financial footing was one of the many changes brought about by the Haskins and Sells study, which was completed in 1975. This self-commissioned, comprehensive overview of the OCC's approach to bank supervision helped bring about the top-down, risk-focused approach that the agency uses in all its work today. In the trust field, too, examiners began focusing on systems and controls, relying on statistical sampling to determine how well banks were complying with their regulatory responsibilities.

For some, this was a tough adjustment. Don Stephens handled it just as you would expect: one day at a time. That, he says, is the approach he's planning to take to retirement after 43 years of OCC service. He'll do some work around his 1922-vintage house, stay active in community service in and around Jacksonville, and do whatever it takes to keep his prized 1969 Mercedes Benz up and running.