STEVENS, J., DISSENTING
WATTERS V. WACHOVIA BANK, N. A.
550 U. S. ____ (2007)
SUPREME COURT OF THE UNITED STATES
NO. 05-1342
LINDA A. WATTERS, COMMISSIONER, MICHIGAN OFFICE OF
INSURANCE AND FINANCIAL SERVICES, PETITIONER
v. WACHOVIA
BANK, N. A., et al.
on writ of certiorari to the united states court of
appeals for the sixth circuit
[April 17, 2007]
Justice Stevens, with whom The
Chief Justice and Justice Scalia join, dissenting.
Congress has enacted no
legislation immunizing national bank subsidiaries from compliance
with nondiscriminatory state laws regulating the business
activities of mortgage brokers and lenders. Nor has it authorized
an executive agency to preempt such state laws whenever it
concludes that they interfere with national bank activities.
Notwithstanding the absence of relevant statutory authority, today
the Court endorses an agency’s incorrect determination that the
laws of a sovereign State must yield to federal power. The
significant impact of the Court’s decision on the federal-state
balance and the dual banking system makes it appropriate to set
forth in full the reasons for my dissent.
I
The National Bank Act (or NBA),
13 Stat. 99, authorized the incorporation of national banks, §5,
id., at 98, and granted them “all such incidental powers
as shall be necessary to carry on the business of banking,” §8,
id., at 98 (codified at 12 U. S. C. §24 Seventh), subject
to regulatory oversight by the Comptroller of the Currency, §54, 13
Stat. 116. To maintain a meaningful role for state legislation and
for state corporations that did not engage in core banking
activities, Congress circumscribed national bank authority.
Notably, national banks were expressly forbidden from making
mortgage loans, §28,
id., at 108.[
Footnote 1] Moreover, the shares of national banks, as
well their real estate holdings, were subject to nondiscriminatory
state taxation, §41,
id., at 111; and while national banks
could lend money, state law capped the interest rates they could
charge, §20,
id., at 105.
Originally, it was anticipated
that “existing banks would surrender their state charters and
re-incorporate under the terms of the new law with national
charters.”[
Footnote 2] That did
not happen. Instead, after an initial post-National Bank Act
decline, state-chartered institutions thrived.[
Footnote 3] What emerged was the competitive mix
of state and national banks known as the dual banking system.
This Court has consistently recognized that
because federal law is generally interstitial, national banks must
comply with most of the same rules as their state counterparts. As
early as 1870, we articulated the principle that has remained the
lodestar of our jurisprudence: that national banks
“are only exempted from State legislation, so far
as that legislation may interfere with, or impair their efficiency
in performing the functions by which they are designed to serve
that government… . They are subject to the laws of the State,
and are governed in their daily course of business far more by the
laws of the State than of the nation. All their contracts are
governed and construed by State laws. Their acquisition and
transfer of property, their right to collect their debts, and their
liability to be sued for debts, are all based on State law.
It
is only when the State law incapacitates the banks from discharging
their duties to the government that it becomes
unconstitutional.”
National Bank v.
Commonwealth, 9 Wall. 353, 362 (1870) (emphasis
added).[
Footnote 4]
Until today, we have remained faithful to the
principle that nondiscriminatory laws of general application that
do not “forbid” or “impair significantly” national bank activities
should not be preempted. See,
e.g.,
Barnett Bank of
Marion Cty., N. A. v.
Nelson,
517 U. S. 25, 33
(1996).[
Footnote 5]
Nor is the Court alone in recognizing the
vital role that state legislation plays in the dual banking system.
Although the dual banking system’s main virtue is its divergent
treatment of national and state banks,[
Footnote 6] Congress has consistently recognized that
state law must usually govern the activities of both national and
state banks for the dual banking system to operate effectively. As
early as 1934, Justice Brandeis observed for the Court that this
congressional recognition is embodied in a long string of
statutes:
“The policy of equalization was adopted in the
National Bank Act of 1864, and has ever since been applied, in the
provision concerning taxation. In amendments to that act and in the
Federal Reserve Act and amendments thereto the policy is expressed
in provisions conferring power to establish branches; in those
conferring power to act as fiduciary; in those concerning interest
on deposits; and in those concerning capitalization. It appears
also to have been of some influence in securing the grant in 1913
of the power to loan on mortgage.”
Lewis v.
Fidelity
& Deposit Co. of Md.,
292 U. S. 559, 564–565
(footnotes, with citations to relevant statutes, omitted).[
Footnote 7]
For the same reasons, we observed in
First Nat.
Bank in Plant City v.
Dickinson,
396 U. S. 122, 133
(1969), that “[t]he policy of competitive equality is … firmly
embedded in the statutes governing the national banking system.” So
firmly embedded, in fact, that “the congressional policy of
competitive equality with its deference to state standards” is not
“open to modification by the Comptroller of the Currency.”
Id., at 138.
II
Although the dual banking system
has remained intact, Congress has radically transformed the
national bank system from its Civil War antecedent and brought
considerably more federal authority to bear on state-chartered
institutions. Yet despite all the changes Congress has made to the
national bank system, and despite its exercise of federal power
over state banks, it has never preempted state laws like those at
issue in this case.
Most significantly, in 1913
Congress established the Federal Reserve System to oversee federal
monetary policy through its influence over the availability of
credit. Federal Reserve Act §§2, 9, 38 Stat. 252, 259. The Act
required national banks and permitted state banks to become Federal
Reserve member banks, and subjected all member banks to Federal
Reserve regulations and oversight.
Ibid. Also of signal
importance, after the banking system collapsed during the Great
Depression, Congress required all member banks to obtain deposit
insurance from the newly established Federal Deposit Insurance
Corporation. Banking Act of 1933 (or Glass-Steagall Act), §8, 48
Stat. 168; see also Banking Act of 1935, 49 Stat. 684. Although
both of these steps meant that many state banks were subjected to
significant federal regulation,[
Footnote 8] “the state banking system continued along with
the national banking system, with no attempt to exercise preemptive
federal regulatory authority over the activities of the existing
state banks.” M. Malloy, Banking and Financial Services Law 48 (2d
ed. 2005).
In addition to these systemic overhauls,
Congress has over time modified the powers of national banks. The
changes are too various to recount in detail, but two are of
particular importance to this case. First, Congress has gradually
relaxed its prohibition on mortgage lending by national banks. In
1913, Congress permitted national banks to make loans secured by
farm land, Federal Reserve Act, §24, 38 Stat. 273, and in
succeeding years, their mortgage-lending power was enlarged to
cover loans on real estate in the vicinity of the bank, Act of
Sept. 7, 1916, 39 Stat. 754, and loans “secured by first liens upon
forest tracts which are properly managed in all respects,” Act of
Aug. 15, 1953, ch. 510, 67 Stat. 614. Congress substantially
expanded national banks’ power to make real estate loans in 1974,
see Housing and Community Development Act, Title VII, §711, 88 Stat
716, and in 1982 it enacted the broad language, now codified at 12
U. S. C. §371(a), authorizing national banks to make “loans …
secured by liens on interests in real estate.” Garn-St Germain
Depository Institutions Act of 1982, Title IV, §403, 96 Stat. 1510.
While these changes have enabled national banks to engage in more
evenhanded competition with state banks, they certainly reflect no
purpose to give them any competitive advantage.[
Footnote 9]
Second, Congress has over the years both
curtailed and expanded the ability of national banks to affiliate
with other companies. In the early part of the century, banks
routinely engaged in investment activities and affiliated with
companies that did the same. The Glass-Steagall Act put an end to
that. “[E]nacted in 1933 to protect bank depositors from any
repetition of the widespread bank closings that occurred during the
Great Depression,”
Board of Governors, FRS v.
Investment Company Institute, 450 U. S. 46, 61 (1981),
Glass-Steagall prohibited Federal Reserve member banks (both state
and national) from affiliating with investment banks.[
Footnote 10] In Congress’ view, the
affiliates had engaged in speculative activities that in turn
contributed to commercial banks’ Depression-era failures.[
Footnote 11] It was this focus on
the welfare of depositors—as opposed to stockholders—that provided
the basis for legislative action designed to ensure bank
solvency.
A scant two years later, Congress forbade
national banks from owning the shares of any company because of a
similar fear that such ownership could undermine the safety and
soundness of national banks:[
Footnote 12] “Except as hereinafter provided or otherwise
permitted by law, nothing herein contained shall authorize the
purchase by [a national bank] for its own account of
any
shares of stock of
any corporation.” Banking Act of 1935,
§308(b), 49 Stat. 709 (emphasis added). That provision remains on
the books today. See 12 U. S. C. §24 Seventh.
These congressional restrictions did not
forbid all affiliations, however, and national banks began
experimenting with new corporate forms. One of those forms involved
the national bank ownership of “operating subsidiaries.” In 1966,
the Comptroller of the Currency took the position “that a national
bank may acquire and hold the controlling stock interest in a
subsidiary operations corporation” so long as that corporation’s
“functions or activities … are limited to one or several of the
functions or activities that a national bank is authorized to carry
on.” 31 Fed. Reg. 11459 (1966). The Comptroller declined to read
the categorical prohibition on national bank ownership of stock to
foreclose bank ownership of operating subsidiaries, finding
authority for this aggressive interpretation of national bank
authority in the “incidental powers” provision of 12 U. S. C.
§24 Seventh. See 31 Fed. Reg. 11460.
While Congress eventually restricted some of
the new corporate structures,[
Footnote 13] it neither disavowed nor endorsed the
Comptroller’s position on national bank ownership of operating
subsidiaries. Notwithstanding the congressional silence, in 1996
the OCC once again attempted to expand national banks’ ownership
powers. The agency issued a regulation permitting national bank
operating subsidiaries to undertake activities that the bank was
not allowed to engage in directly. 12 CFR §§5.34(d), (f)
(1997) (authorizing national banks to “acquire or establish an
operating subsidiary to engage in [activities] different from that
permissible for the parent national bank,” so long as those
activities are “part of or incidental to the business of banking,
as determined by the Comptroller of the Currency”); see also 61
Fed. Reg. 60342 (1996).
Congress overruled this OCC regulation in 1999
in the Gramm-Leach-Bliley Act (GLBA), 113 Stat. 1338. The GLBA was
a seminal piece of banking legislation inasmuch as it repealed the
Glass-Steagall Act’s ban on affiliations between commercial and
investment banks. See §101,
id., at 1341. More
relevant to this case, however, the GLBA addressed the powers
of national banks to own subsidiary corporations. The Act provided
that any national bank subsidiary engaging in activities forbidden
to the parent bank would be considered a “financial subsidiary,”
§121, id., at 1380, and would be subjected to heightened
regulatory obligations, see, e.g., 12 U.
S. C. §371c–1(a)(1). The GLBA’s definition of “financial
subsidiaries” excluded those subsidiaries that “engag[e] solely in
activities that national banks are permitted to engage in directly
and are conducted subject to the same terms and conditions that
govern the conduct of such activities by national banks.”
§24a(g)(3).
By negative
implication, then, only subsidiaries engaging in purely national
bank activities—which the OCC had termed “operating subsidiaries,”
but which the GLBA never mentions by name—could avoid being
subjected to the restrictions that applied to financial
subsidiaries. Compare §371c(b)(2) (exempting subsidiaries from
certain regulatory restrictions) with §371c(e) (clarifying that
financial subsidiaries are not to be treated as “subsidiaries”).
Taken together, these provisions worked a rejection of the OCC’s
position that an operating subsidiary could engage in
activities that national banks could not engage in
directly.[Footnote 14] See
§24a(g)(3). Apart from this implicit rejection of the OCC’s 1996
regulation, however, the GLBA does not even mention operating
subsidiaries.
In sum, Congress
itself has never authorized national banks to use subsidiaries
incorporated under state law to perform traditional banking
functions. Nor has it authorized OCC to “license” any
state-chartered entity to do so. The fact that it may have
acquiesced in the OCC’s expansive interpretation of its authority
is a plainly insufficient basis for finding
preemption.
III
It
is familiar learning that “[t]he purpose of Congress is the
ultimate touchstone of pre-emption analysis.” Cipollone v.
Liggett Group, Inc., 505 U. S. 504, 516
(1992) (internal quotation marks omitted). In divining that
congressional purpose, I would have hoped that the Court would hew
both to the NBA’s text and to the basic rule, central to our
federal system, that “[i]n all pre-emption cases … we ‘start with
the assumption that the historic police powers of the States were
not to be superseded by the Federal Act unless that was the clear
and manifest purpose of Congress.’ ” Medtronic, Inc.
v. Lohr, 518 U. S. 470, 485
(1996) (quoting Rice v. Santa Fe Elevator Corp.,
331 U. S. 218,
230 (1947)). Had it done so, it could have avoided the untenable
conclusion that Congress meant the NBA to preempt the state laws at
issue here.
The
NBA in fact evinces quite the opposite congressional purpose. It
provides in 12 U. S. C. §484(a) that “[n]o national bank shall
be subject to any visitorial powers except as authorized by Federal
law.” Although this exemption from state visitorial authority has
been in place for more than 140 years, see §54, 13 Stat. 116
(national banks “shall not be subject to any other visitorial
powers than such as are authorized by this act”), it is significant
that Congress has never extended 12 U. S. C. §484(a)’s
preemptive blanket to cover national bank
subsidiaries.
This is not,
contrary to the Court’s suggestion, see ante, at 14–15,
some kind of oversight. As the complex history of the banking laws
demonstrates, Congress has legislated extensively with respect to
national bank “affiliates”—an operating subsidiary is one type of
affiliate[Footnote 15]—and
has moreover given the OCC extensive supervisory powers over those
affiliates, see §481 (providing that a federal examiner “shall have
power to make a thorough examination of all the affairs of [a
national bank] affiliate, and in doing so he shall have power … to
make a report of his findings to the Comptroller of the Currency”).
That Congress lavished such attention on national bank affiliates
and conferred such far-reaching authority on the OCC without ever
expanding the scope of §484(a) speaks volumes about Congress’
preemptive intent, or rather its lack thereof. Consistent with our
presumption against preemption—a presumption I do not understand
the Court to reject—I would read §484(a) to reflect Congress’
considered judgment not to preempt the application of state
visitorial laws to national bank “affiliates.”
Instead, the
Court likens §484(a) to a congressional afterthought, musing that
it merely “recogniz[es] the burdens and undue duplication that
state controls could produce.” Ante, at 9. By that logic,
I take it the Court believes that the NBA would impliedly preempt
all state visitorial laws as applied to national banks even if
§484(a) did not exist. That is surprising and unlikely. Not
only would it reduce the NBA’s express preemption provision to so
much surplusage, but it would give Congress’ silence greater
statutory dignity than an express command. Perhaps that explains
why none of the four Circuits to have addressed this issue relied
on the preemptive force of the NBA itself. Each instead asked
whether the OCC’s regulations preempted state laws.[Footnote 16] Stranger still, the Court’s
reasoning would suggest that operating subsidiaries have been
exempted from state visitorial authority from the moment the OCC
first authorized them in 1966. See 31 Fed. Reg. 11459. Yet if that
were true, surely at some point over the last 40 years some
national bank would have gone to court to spare its subsidiaries
from the yoke of state regulation; national banks are neither
heedless of their rights nor shy of litigation. But respondents
point us to no such cases that predate the OCC’s preemption
regulations.
The Court
licenses itself to ignore §484(a)’s limits by reasoning that “when
state prescriptions significantly impair the exercise of authority,
enumerated or incidental under the NBA, the State’s regulations
must give way.” Ante, at 7. But it intones this
“significant impairment” refrain without remembering that it merely
provides a useful tool—not the only tool, and not even the best
tool—to discover congressional intent. As we explained in
Barnett Bank, this Court “take[s] the view that
normally Congress would not want States to forbid, or to
impair significantly, the exercise of a power that Congress has
explicitly granted.” 517 U. S., at 33 (emphasis added). But any
assumption about what Congress “normally” wants is of little moment
when Congress has said exactly what it wants.
The Court also
puts great weight on Barnett Bank’s reference to our
“history … of interpreting grants of both enumerated and incidental
‘powers’ to national banks as grants of authority not normally
limited by, but rather ordinarily pre-empting, contrary state law.”
Id., at 32. The Court neglects to mention that Barnett
Bank is quite clear that this interpretive rule applies only
when Congress has failed (as it often does) to manifest an explicit
preemptive intent. Id., at 31. “In that event,
courts must consider whether the federal statute’s ‘structure and
purpose,’ or nonspecific statutory language, nonetheless reveal a
clear, but implicit, pre-emptive intent.” Ibid. (emphasis
added). Barnett Bank nowhere holds that we can ignore
strong indicia of congressional intent whenever a state law
arguably trenches on national bank powers. After all, the case
emphasized that the question of preemption “is basically one of
congressional intent. Did Congress, in enacting the Federal
Statute, intend to exercise its constitutionally delegated
authority to set aside the laws of a State?” Id., at 30.
The answer here is a resounding no.
Even if it were appropriate to delve into the
significant impairment question, the history of this very case
confirms that neither the Mortgage Brokers, Lenders, and Services
Licensing Act, Mich. Comp. Laws Ann. §445.1651 et seq.
(West 2002 and Supp. 2006), nor the Secondary Mortgage Loan Act,
§493.51 et seq. (West 2005), conflicts with “the letter or
the general objects and purposes of Congressional legislation.”
Davis v. Elmira Savings Bank, 161 U. S. 275, 290 (1896). Enacted to
protect consumers from mortgage lending abuses, the Acts require
mortgage brokers, mortgage servicers, and mortgage lenders to
register with the State, §§445.1652(1) (West Supp. 2006), 493.52(1)
(West 2005), to submit certain financial statements, §§445.1657(2)
(West 2002), 493.56a(2) (West 2005), and to submit to state
visitorial oversight, §§445.1661 (West 2002), 493.56b (West 2005).
Because the Acts expressly provide that they do not apply to
“depository financial institution[s],” §445.1675(a) (West 2002),
neither national nor state banks are covered.[Footnote 17] The statute therefore covers only
nonbank companies incorporated under state law.[Footnote 18]
Respondent Wachovia Mortgage Corporation has
never engaged in the core banking business of accepting deposits.
In 1997, when Wachovia Mortgage was first licensed to do business
in Michigan, it was owned by a holding company that also owned the
respondent Wachovia Bank, N. A. (Neither the holding company nor
the Bank did business in Michigan.) There is no evidence, and no
reason to believe, that compliance with the Michigan statutes
imposed any special burdens on Wachovia Mortgage’s activities, or
that the transfer in 2003 of its ownership from the holding company
to the Bank required it to make any changes whatsoever in its
methods of doing business. Neither before nor after that transfer
was there any discernible federal interest in granting the company
immunity from regulations that applied evenhandedly to its
competitors. The mere fact that its activities may also be
performed by its banking parent provides at best a feeble
justification for immunizing it from state regulation. And it is a
justification that the longstanding congressional “policy of
competitive equality” clearly outweighs. See Plant City,
396 U. S., at 133.
Again, however,
it is beside the point whether in the Court’s judgment the Michigan
laws will hamper national banks’ ability to carry out their banking
functions through operating subsidiaries. It is Congress’
judgment that matters here, and Congress has in the NBA preempted
only those laws purporting to lodge with state authorities
visitorial power over national banks. 12 U. S. C. §484(a). In
my view, the Court’s eagerness to infuse congressional silence with
preemptive force threatens the vitality of most state laws as
applied to national banks—a result at odds with the long and
unbroken history of dual state and federal authority over national
banks, not to mention our federal system of government. It is
especially troubling that the Court so blithely preempts Michigan
laws designed to protect consumers. Consumer protection is
quintessentially a “field which the States have traditionally
occupied,” Rice, 331 U. S., at 230;[Footnote 19] the Court should therefore have
been all the more reluctant to conclude that the “clear and
manifest purpose of Congress” was to set aside the laws of a
sovereign State, ibid.
IV
Respondents
maintain that even if the NBA lacks preemptive force, the GLBA’s
use of the phrase “same terms and conditions” reflects a
congressional intent to preempt state laws as they apply to the
mortgage lending activities of operating subsidiaries. See 12 U.
S. C. §24a(g)(3). Indeed, the Court obliquely suggests as
much, salting its analysis of the NBA with references to the GLBA.
See ante, at 13, 15. Even a cursory review of the GLBA’s
text shows that it cannot bear the preemptive weight respondents
(and perhaps the Court) would assign to it.
The phrase “same
terms and conditions” appears in the definition of
“financial subsidiary,” not in a provision of the statute
conferring national bank powers. Even there, it serves only to
describe what a financial subsidiary is not. See §24a(g)(3)
(defining financial subsidiary as any subsidiary “other than a
subsidiary that … engages solely in activities that national banks
are permitted to engage in directly and are conducted subject to
the same terms and conditions that govern the conduct of such
activities by national banks”). Apart from this slanting reference,
the GLBA never mentions operating subsidiaries. Far from a
demonstration that the “clear and manifest purpose of Congress” was
to preempt the type of law at issue here, Rice, 331 U. S.,
at 230, the “same terms and conditions” language at most reflects
an uncontroversial acknowledgment that operating subsidiaries of
national banks are subject to the same federal oversight as their
national bank parents.[Footnote
20] It has nothing to do with preemption.
Congress in fact
disavowed any such preemptive intent. Section 104 of the GLBA is
titled “Operation of State Law,” 113 Stat. 1352, and it devotes
more than 3,000 words to explaining which state laws Congress meant
the GLBA to preempt. Leave aside the oddity of a Congress that
addresses preemption in exquisite detail in one provision of the
GLBA but (according to respondents) uses only four words to express
a preemptive intent elsewhere in the statute. More importantly,
§104(d)(4) provides that “[n]o State statute … shall
be preempted” by the GLBA unless that statute has a disparate
impact on federally chartered depository institutions,
“prevent[s] a depository institution or affiliate thereof
from engaging in activities authorized or permitted by this Act,”
or “conflict[s] with the intent of this Act generally to permit
affiliations that are authorized or permitted by Federal law.”
Id., at 1357 (emphasis added) (codified at 15 U.
S. C. §6701(d)(4)). No one claims that the Michigan laws at
issue here are discriminatory, forbid affiliations, or “prevent”
any operating subsidiary from engaging in banking activities. It
necessarily follows that the GLBA does not preempt
them.
Even assuming
that the phrase has something to do with preemption, it is simply
not the case that the nonencroachment of state regulation is a
“term and condition” of engagement in the business of banking. As a
historical matter, state laws have always applied to national banks
and have often encroached on the business of banking. See
National Bank, 9 Wall., at 362 (observing that national
banks “are subject to the laws of the State, and are governed in
their daily course of business far more by the laws of the State
than of the nation”). The Court itself acknowledges that state
usury, contract, and property law govern the activities of national
banks and their subsidiaries, ante, at 6, notwithstanding
that they vary across “all States in which the banks operate,”
ante, at 8. State law has always provided the legal
backdrop against which national banks make real estate loans, and
“[t]he fact that the banking agencies maintain a close surveillance
of the industry with a view toward preventing unsound practices
that might impair liquidity or lead to insolvency does not make
federal banking regulation all-pervasive.” United States
v. Philadelphia Nat. Bank, 374 U. S. 321, 352
(1963).
V
In
my view, the most pressing questions in this case are whether
Congress has delegated to the Comptroller of the Currency the
authority to preempt the laws of a sovereign State as they apply to
operating subsidiaries, and if so, whether that authority was
properly exercised here. See 12 CFR §7.4006 (2006) (“State laws
apply to national bank operating subsidiaries to the same extent
that those laws apply to the parent national bank”). Without
directly answering either question, the Court concludes that
preemption is the “necessary consequence” of various congressional
statutes. Ante, at 15. Because I read those statutes
differently, I must consider (as did the four Circuits to have
addressed this issue) whether an administrative agency can assume
the power to displace the duly enacted laws of a state
legislature.
To
begin with, Congress knows how to authorize executive agencies to
preempt state laws.[Footnote
21] It has not done so here. Nor does the statutory provision
authorizing banks to engage in certain lines of business that are
“incidental” to their primary business of accepting and managing
the funds of depositors expressly or implicitly grant the OCC the
power to immunize banks or their subsidiaries from state
regulation.[Footnote 22] See
12 U. S. C. §24 Seventh. For there is a vast and obvious
difference between rules authorizing or regulating conduct and
rules granting immunity from regulation. The Comptroller may well
have the authority to decide whether the activities of a mortgage
broker, a real estate broker, or a travel agent should be
characterized as “incidental” to banking, and to approve a bank’s
entry into those businesses, either directly or through its
subsidiaries. See, e.g., NationsBank of N. C., N.
A. v. Variable Annuity Life Ins. Co., 513 U. S. 251, 258
(1995) (upholding the OCC’s interpretation of the “incidental
powers” provision to permit national banks to serve as agents in
annuity sales). But that lesser power does not imply the far
greater power to immunize banks or their subsidiaries from state
laws regulating the conduct of their competitors.[Footnote 23] As we said almost 40 years
ago, “the congressional policy of competitive equality with its
deference to state standards” is not “open to modification by the
Comptroller of the Currency.” Plant City, 396 U. S., at
138.[Footnote
24]
Were I inclined
to assume (and I am not) that congressional silence should be read
as a conferral of preemptive authority, I would not find that the
OCC has actually exercised any such authority here. When the agency
promulgated 12 CFR §7.4006, it explained that “[t]he section itself
does not effect preemption of any State law; it reflects
the conclusion we believe a Federal court would reach, even in the
absence of the regulation … .” 66 Fed. Reg. 34790 (2001)
(emphasis added). Taking the OCC at its word, then, §7.4006 has no
preemptive force of its own, but merely predicts how a federal
court’s analysis will proceed.
Even if the OCC
did intend its regulation to preempt the state laws at issue here,
it would still not merit Chevron deference. No case from
this Court has ever applied such a deferential standard to an
agency decision that could so easily disrupt the federal-state
balance. To be sure, expert agency opinions as to which state laws
conflict with a federal statute may be entitled to “some weight,”
especially when “the subject matter is technical” and “the relevant
history and background are complex and extensive.” Geier
v. American Honda Motor Co., 529 U. S. 861, 883
(2000). But “[u]nlike Congress, administrative agencies are clearly
not designed to represent the interests of States, yet with
relative ease they can promulgate comprehensive and detailed
regulations that have broad preemption ramifications for state
law.” Id., at 908 (Stevens, J., dissenting).[Footnote 25] For that reason, when an
agency purports to decide the scope of federal preemption, a
healthy respect for state sovereignty calls for something less than
Chevron deference. See 529 U. S., at 911–912; see also
Medtronic, 518 U. S., at 512 (O’Connor, J., concurring in
part and dissenting in part) (“It is not certain that an agency
regulation determining the pre-emptive effect of any
federal statute is entitled to deference”).
In any event,
neither of the two justifications the OCC advanced when it
promulgated 12 CFR §7.4006 withstand Chevron analysis.
First, the OCC observed that the GLBA “expressly acknowledged the
authority of national banks to own subsidiaries” that conduct
national bank activities “ ‘subject to the same terms and
conditions that govern the conduct of such activities by national
banks.’ ” 66 Fed. Reg. 34788 (quoting 12 U. S. C.
§24a(g)(3)). The agency also noted that it had folded the
“ ‘same terms and conditions’ ” language into an
implementing regulation, 66 Fed. Reg. 34788 (citing 12 CFR
§5.34(e)(3) (2001)). According to the OCC, “[a] fundamental
component of these descriptions of the characteristics of operating
subsidiaries in GLBA and the OCC’s rule is that state laws apply to
operating subsidiaries to the same extent as they apply to the
parent national bank.” 66 Fed. Reg. 34788.
This is
incorrect. As explained above, the GLBA’s offhand use of the “same
terms and conditions” language says nothing about preemption. See
supra, at 15–17. Nor can the OCC’s incorporation of that
language into a regulation support the agency’s position: “Simply
put, the existence of a parroting regulation does not change the
fact that the question here is not the meaning of the regulation
but the meaning of the statute.” Gonzales v.
Oregon, 546
U. S. 243, 257 (2006). The OCC’s argument to the contrary is
particularly surprising given that when it promulgated its “same
terms and conditions” regulation, it said not one word about
preemption or the federalism implications of its rule—an
inexplicable elision if a “fundamental component” of the phrase is
the need to operate unfettered by state oversight. Compare 65 Fed.
Reg. 12905–12910 (2000), with Exec. Order No. 13132, §§2, 4, 64
Fed. Reg. 43255, 43257 (1999) (requiring agencies to explicitly
consider the “federalism implications” of their chosen policies and
to hesitate before preempting state laws).
Second, the OCC
describes operating subsidiaries “as the equivalent of departments
or divisions of their parent banks,” 66 Fed. Reg. 34788, which,
through the operation of 12 U. S. C. §484(a), would not be
subject to state visitorial powers. The OCC claims that national
banks might desire to conduct their business through operating
subsidiaries for the purposes of “controlling operations costs,
improving effectiveness of supervision, more accurate determination
of profits, decentralizing management decisions [and] separating
particular operations of the bank from other operations.” Brief for
United States as Amicus Curiae 19 (quoting 31 Fed. Reg.
11460). It is obvious, however, that a national bank could realize
all of those benefits through the straightforward
expedient of dissolving the corporation and making it in fact a
“department” or a “division” of the parent bank.
Rather, the
primary advantage of maintaining an operating subsidiary as a
separate corporation is that it shields the national bank from the
operating subsidiaries’ liabilities. United States v.
Bestfoods, 524 U. S. 51, 61 (1998)
(“It is a general principle of corporate law deeply ingrained in
our economic and legal systems that a parent corporation … is not
liable for the acts of its subsidiary” (internal quotation marks
omitted)). For that reason, the OCC’s regulation is about far more
than mere “corporate structure,” ante, at 13, or “internal
governance,” ante, at 17 (citing Wells Fargo Bank,
N. A. v. Boutris, 419 F. 3d 949, 960 (CA9
2005)); see also Dole Food Co. v. Patrickson,
538 U. S. 468,
474 (2003) (“In issues of corporate law structure often matters”).
It is about whether a state corporation can avoid
complying with state regulations, yet nevertheless take
advantage of state laws insulating its owners from
liability. The federal interest in protecting depositors in
national banks from their subsidiaries’ liabilities surely does not
justify a grant of immunity from laws that apply to competitors.
Indeed, the OCC’s regulation may drive companies seeking refuge
from state regulation into the arms of federal parents, harm those
state competitors who are not lucky enough to find a federal
benefactor, and hamstring States’ ability to regulate the affairs
of state corporations. As a result, the OCC’s regulation threatens
both the dual banking system and the principle of competitive
equality that is its cornerstone.
VI
The
novelty of today’s holding merits a final comment. Whatever the
Court says, this is a case about an administrative agency’s power
to preempt state laws. I agree with the Court that the Tenth
Amendment does not preclude the exercise of that power. But the
fact that that Amendment was included in the Bill of Rights should
nevertheless remind the Court that its ruling affects the
allocation of powers among sovereigns. Indeed, the reasons for
adopting that Amendment are precisely those that undergird the
well-established presumption against preemption.
With rare exception, we have found preemption
only when a federal statute commanded it, see Cipollone,
505 U. S., at 517, when a conflict between federal and state law
precluded obedience to both sovereigns, see Florida Lime &
Avocado Growers, Inc. v. Paul, 373 U. S. 132, 142–143
(1963), or when a federal statute so completely occupied a field
that it left no room for additional state regulation, see
Napier v. Atlantic Coast Line R. Co., 272 U. S. 605, 613
(1926). Almost invariably the finding of preemption has been based
on this Court’s interpretation of statutory language or of
regulations plainly authorized by Congress. Never before have we
endorsed administrative action whose sole purpose was to preempt
state law rather than to implement a statutory
command.
Accordingly, I
respectfully dissent.
Footnote 1
“There is no
more characteristic difference between the state and the national
banking laws than the fact that almost without exception, state
banks may loan on real estate security, while national banks are
prohibited from doing so.” G. Barnett, State Banking in the United
States Since the Passage of the National Bank Act 50 (1902)
(reprint 1983) (hereinafter Barnett).
Footnote 2
B. Hammond,
Banks and Politics in America: from the Revolution to the Civil War
728 (1957).
Footnote 3
Id.,
at 733. See also Barnett 73–74 (estimating that more than 800 state
banks were in operation in 1877, and noting the “remarkable
increase in the number of state banks” during the last two decades
of the 19th century).
Footnote 4
See also
McClellan v. Chipman, 164 U. S. 347, 357
(1896) (explaining that our cases establish “a rule and an
exception, the rule being the operation of general state laws upon
the dealings and contracts of national banks, the exception being
the cessation of the operation of such laws whenever they expressly
conflict with the laws of the United States or frustrate the
purpose for which the national banks were created, or impair their
efficiency to discharge the duties imposed upon them by the law of
the United States”).
Footnote 5
See also
Anderson Nat. Bank v. Luckett, 321 U. S. 233, 248
(1944) (“This Court has often pointed out that national banks are
subject to state laws, unless those laws infringe the national
banking laws or impose an undue burden on the performance of the
banks’ functions”); Davis v. Elmira Savings Bank,
161 U. S. 275, 290 (1896) (“Nothing,
of course, in this opinion is intended to deny the operation of
general and undiscriminating state laws on the contracts of
national banks, so long as such laws do not conflict with the
letter or the general objects and purposes of Congressional
legislation”)
Footnote 6
See Scott, The
Dual Banking System: A Model of Competition in Regulation, 30 Stan.
L. Rev. 1, 8–13 (1978) (explaining the perceived benefits of
the dual banking system).
Footnote 7
See also
First Nat. Bank of Logan v. Walker Bank & Trust
Co., 385 U. S.
252, 261 (1966) (observing that in passing the McFadden Act,
“Congress was continuing its policy of equalization first adopted
in the National Bank Act of 1864”).
Footnote 8
What has
emerged are “two interrelated systems in which most state-chartered
banks are subject to varying degrees of federal regulation, and
where state laws are made applicable, to a varying extent, to
federally-chartered institutions.” 1 A. Graham, Banking Law §1.04,
p. 1–12 (Nov. 2006).
Footnote 9
It is
noteworthy that the principal cases that the Court cites to support
its conclusion that the federal statute itself preempts the
Michigan laws were decided years before Congress authorized
national banks to engage in mortgage lending and years before the
Office of the Comptroller of the Currency (OCC) authorized their
use of operating subsidiaries. See ante, at 6,
9.
Footnote 10
In
Investment Company Institute v. Camp, 401 U. S. 617 (1971), we
set aside a regulation issued by the Comptroller of the Currency
authorizing banks to operate collective investment funds because
that activity was prohibited by the Glass-Steagall Act. Similarly,
in Securities Industry Assn. v. Board of Governors,
FRS, 468 U. S.
137 (1984), the Glass-Steagall Act provided the basis for
invalidating a regulation authorizing banks to enter the business
of selling third-party commercial paper.
Footnote 11
See J. Macey,
G. Miller, & R. Carnell, Banking Law and Regulation 21 (3d ed.
2001) (describing “the alleged misdeeds of the large banks’
securities affiliates and the ways in which such affiliations could
promote unsound lending, irresponsible speculation, and conflicts
of interest”).
Footnote 12
See 31 Fed.
Reg. 11459 (1966).
Footnote 13
See Bank
Holding Company Act of 1956, 70 Stat. 133; Bank Holding Company Act
Amendments of 1970, 84 Stat. 1760.
Footnote 14
While the
statutory text provides ample support for this conclusion, it is
noteworthy that it was so understood by contemporary commentators.
See, e.g., 145 Cong. Rec. 29681 (1999) (“Recently,
the Comptroller of the Currency has interpreted section 24
(Seventh) of the National Bank Act to permit national banks to own
and control subsidiaries engaged in activities that national banks
cannot conduct directly. These decisions and the legal reasoning
therein are erroneous and contrary to the law. The [GLBA] overturns
these decisions … .” (statement of Representative
Bliley)).
Footnote 15
See 12 U.
S. C. §221a(b) (defining affiliates to include “any
corporation” that a federal member bank owns or
controls).
Footnote 16
See
National City Bank of Indiana v. Turnbaugh, 463
F. 3d 325, 331–334 (CA4 2006) (holding that State law conflicted
with OCC regulations, not with the NBA); Wachovia Bank,
N. A. v. Burke, 414 F. 3d 305, 315–316 (CA2
2005) (same); 431 F. 3d 556, 560–563 (CA6 2005) (case below)
(same); Wells Fargo Bank, N. A. v. Boutris,
419 F. 3d 949, 962–967 (CA9 2005) (same).
Footnote 17
While the Court
at one point observes that “the Michigan provisions at issue exempt
national banks from coverage,” see ante, 8, that is
because they are “banks,” not because they are “national.” See
ante, at 2–3 (noting that “Michigan’s statutory regime
exempts banks, both national and state, from state
mortgage lending regulation” (emphasis added)).
Footnote 18
The Michigan
laws focus on consumer protection, whereas the OCC regulations
quoted by the Court focus on protection of bank depositors. See
ante, at 7, n. 4, and 11, n. 8.
Footnote 19
See also
General Motors Corp. v. Abrams, 897 F. 2d
34, 41–43 (CA2 1990) (“Because consumer protection law is a field
traditionally regulated by the states, compelling evidence of an
intention to preempt is required in this area”).
Footnote 20
See 31 Fed.
Reg. 11460 (noting that OCC maintains regulatory oversight of
operating subsidiaries).
Footnote 21
See,
e.g., 47 U. S. C. §§253(a), (d) (authorizing the
Federal Communications Commission to preempt “any [state] statute,
regulation, or legal requirement” that “may prohibit or have the
effect of prohibiting the ability of any entity to provide any
interstate or intrastate telecommunications service”); 30 U.
S. C. §1254(g) (preempting any statute that conflicts with
“the purposes and the requirements of this chapter” and permitting
the Secretary of the Interior to “set forth any State law or
regulation which is preempted and superseded”); 49 U. S. C.
§5125(d) (authorizing the Secretary of Transportation to decide
whether a state or local statute that conflicts with the regulation
of hazardous waste transportation is preempted).
Footnote 22
Congress did
make an indirect reference to regulatory preemption in the
Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, §114, 108 Stat. 2367 (codified at 12 U. S. C. §43(a)).
The Riegle-Neal Act requires the OCC to jump through additional
procedural hoops (specifically, notice and comment, even for
opinion letters and interpretive rules) before “conclud[ing] that
Federal law preempts the application to a national bank of any
State law regarding community reinvestment, consumer protection,
fair lending, or the establishment of intrastate branches.”
Ibid. By its own terms, however, this provision
granted no preemption authority to the
OCC.
Footnote 23
In a recent
adoption of a separate preemption regulation, the OCC located the
source of its authority to displace state laws in 12 U.
S. C. §§93a and 371. See 69 Fed. Reg. 1908 (2004). Both
provisions are generic authorizations of rulemaking authority,
however, and neither says a word about preemption. See 12 U.
S. C. §93a (“[T]he Comptroller of the Currency is authorized
to prescribe rules and regulations to carry out the
responsibilities of the office”); §371(a) (authorizing national
banks to make real estate loans “subject to … such restrictions and
requirements as the Comptroller of the Currency may prescribe by
regulation or order”). Needless to say, they provide no textual
foundation for the OCC’s assertion of preemption
authority.
Footnote 24
This conclusion
does not touch our cases holding that a properly promulgated agency
regulation can have a preemptive effect should it conflict
with state law. See Hillsborough County v. Automated
Medical Laboratories, Inc., 471 U. S. 707, 713
(1985) (“We have held repeatedly that state laws can be pre-empted
by federal regulations as well as by federal statutes”); see also
Fidelity Fed. Sav. & Loan Assn. v. De la
Cuesta, 458 U.
S. 141, 154–159 (1982) (holding that a regulation authorizing
federal savings-and-loan associations to include due-on-sale
clauses in mortgage contracts conflicted with a state-court
doctrine that such clauses were unenforceable); City of New
York v. FCC, 486 U. S. 57, 59, 65–70
(1988) (finding that the FCC’s adoption of “regulations that
establish technical standards to govern the quality of cable
television signals” preempted local signal quality standards). My
analysis is rather confined to agency regulations (like the one at
issue here) that “purpor[t] to settle the scope of federal
preemption” and “reflec[t] an agency’s effort to transform the
preemption question from a judicial inquiry into an administrative
fait accompli.” See Note, The Unwarranted Regulatory
Preemption of Predatory Lending Laws, 79
N. Y. U. L. Rev. 2274, 2289
(2004).
Footnote 25
See also
Mendelson, Chevron and Preemption, 102 Mich. L. Rev.
737, 779–790 (2003–2004) (arguing that agencies are generally
insensitive to federalism concerns).
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