Message from the Commissioner

    June 9, 2009

    To: California State Chartered Financial Institutions
    From: William S. Haraf, Commissioner of Financial Institutions

    Hello Everyone,

    In just three weeks time, the California Department of Financial Institutions will celebrate its 100th anniversary. The precursor of today's DFI, the State Banking Department, was formed by the 1909 Bank Act which became effective July 1.

    When the new Superintendent of Banks, Alden Anderson, assumed office on that day, there were 486 State banks with a total of $575 million of assets. In today's dollars, this translates into approximately $14 billion, but the California economy was much smaller then. During his first year, he closed 13 banks because of capital impairment and/or mismanagement.

    In the Department's first annual report, Superintendent Anderson noted that the Bank Act was initially controversial -- some bankers "believed the act too drastic and far-reaching in its effects." However, he went on to say: "with a better acquaintance with the law and a realization on their part that there must be regulation and supervision,...they have generally come to believe that it serves its purpose well."

    Since then, our Department has overseen California's banks through the Great Depression, the great inflation of the 1970s, the S&L crisis, and the banking problems of the late 1980s and early 1990s. In 1995, the current DFI was created when the regulation of all state licensed deposit-taking institutions was consolidated into one department. We have continued to respond to new challenges, evolving responsibilities, and a changing environment with this broader mandate ever since. But our mission remains the same as it was at the Department's inception: to protect and serve California's citizens through the effective regulation and supervision of financial institutions licensed by the Department. And our primary focus remains the same as well: the safety and soundness of financial institutions under our supervision.

    Superintendent Anderson took the occasion of the 1910 annual report, the Department's first, to make a few points about regulation and supervision that still resonate with us in the Department today. "It is not my policy to waste time writing letters to good banks on trivial matters," he noted. And: "I have endeavored to get away from.the formal proving of book figures.I have endeavored to get at the real condition and status of their assets; to learn and know the facts at all times.The character of the men [men and women today] administering the affairs of banks is noted, and I have insisted upon directors holding frequent meetings, and familiarizing themselves thoroughly with the affairs of their banks."

    The Superintendent commended "those who have been employed in the department for their efficiency, zeal, and general disposition to work hard to accomplish results," a commendation I take this opportunity to reiterate today.

    Finally, he noted with some apparent pride: "I have had the satisfactory moral support of conservative bankers." This is something all of us at the Department of Financial Institutions aspire to achieve from all of our licensees.

    In difficult times like these, with a poor economy, a troubled financial system, a state budget crisis, and regulatory restructuring proposals under consideration at both the state and federal level, it is worth reflecting on this long history. Our Department and California's state chartered financial institutions have been through difficult periods before. Although institutions have suffered losses, and some have failed, the resiliency of our system is evident. The California economy will bounce back. Our political leaders will find a way through the fiscal crisis. And state chartered financial institutions will continue to support households, businesses and communities across the state in the decades to come under the thoughtful supervision of our Department.

    I wish you strength and good fortune in these challenging times. As I have said in prior messages, my door is always open.


    William S. Haraf
    Department of Financial Institutions
    45 Fremont St., Suite 1700
    San Francisco, CA 94105-2219