The Fed would serve as the country's central bank, regulating its members (including all national banks) and overseeing a new, more flexible currency that could grow with the needs of the economy and would gradually take the place of national bank notes in the money supply. The last such notes were issued in 1929. Despite its name, the OCC was now officially out of the currency business.
No longer burdened with the administration of a complex monetary system, the OCC sharpened its focus on bank examination and regulation. It became essentially an organization of national bank examiners charged with doing one job: maintaining the safety and soundness of the banks they supervised.
While the OCC's work after 1913 was simplified in one respect, it was complicated by the surge in new bank formation. By 1921 there were more than 29,000 commercial banks in the United States, three-quarters of them state-chartered and many so thinly capitalized that the loss of a single large deposit or loan could bankrupt them. In addition, there were thousands of savings and loan institutions that specialized in making residential mortgages and that, consequently, were extremely vulnerable to fluctuations in house prices.
The OCC had long taken a stand against chartering new banks in communities that already had more banks than they could support. The shift in banking resources away from the national charter and federal authority nevertheless was a development the OCC could not ignore.
With the agency's support, Congress passed the McFadden Act of 1927, which empowered national banks to increase their loans to single individuals, to make real estate loans, to deal in securities, and to open branches. The Comptrollers in office between the two world wars were resolute in maintaining high supervisory standards, upholding the quality of OCC supervision, and refusing charters to banks they believed had little or no prospect of success.