CONFERENCE OF STATE BANK SUPERVISORS, ET AL., PETITIONERS V. BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, ET AL.

   No. 86-1024

   In the Supreme Court of the United States

   October Term, 1986

   On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Eleventh Circuit

   Brief for the Federal Respondent in Opposition

            TABLE OF CONTENTS
   Questions Presented
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The opinions of the court of appeals (Pet. App. 10a-29a, 46a-52a)
are reported at 760 F.2d 1135 and 800 F.2d 1534, respectively.  The
order of the Board of Governors of the Federal Reserve System (Pet.
App. 1a-9a) is reported at 70 Fed. Res. Bull. 371.

                             JURISDICTION

   The judgment of the court of appeals was entered on October 6,
1986.  The petition for a writ of certiorari was filed on December 23,
1986.  The jurisdiction of this Court is invoked under 28 U.S.C.
1254(1).

                          QUESTION PRESENTED

   Whether an institution that takes deposits but does not make
commercial loans is a "bank" within the meaning of Section 3(d) of the
Bank Holding Company Act, 12 U.S.C. 1842(d).

                               STATEMENT

   1. Section 2(c) of the Bank Holding Company Act of 1956 (BHCA or
Act) (12 U.S.C. 1841(c)) defines "bank" to mean "any institution * * *
which (1) accepts deposits that the depositor has a legal right to
withdraw on demand, and (2) engages in the business of making
commercial loans." The term "bank holding company," in turn, is
defined to "mean() any company which has control over any bank" (12
U.S.C. 1841(a)(1)).  The BHCA subjects such companies to extensive
regulation.  Among other things, Section 3(d) of the Act (12 U.S.C.
1842(d)) -- commonly known as the Douglas Amendment -- prohibits a
bank holding company that has its principal place of business in one
state from acquiring a bank located in another state, unless the
acquisition "is specifically authorized by the statute laws of the
State in which such bank is located." In addition, Section 4 of the
BHCA (12 U.S.C. 1843) generally prohibits bank holding companies from
engaging in nonbanking activities, although Section 4(c)(8), 12 U.S.C.
1843(c)(8), permits such companies to conduct activities that are
deemed by the Federal Reserve Board "to be so closely related to
banking * * * as to be a proper incident thereto."

   Respondent U.S. Trust Corporation (U.S. Trust) is a bank holding
company located in New York.  Since 1981, U.S. Trust has owned a
nondepository trust company subsidiary in Florida.  In 1983, U.S.
Trust sought the Board's approval, pursuant to Section 4(c)(8) of the
BHCA, to expand its Florida subsidiary's "non-bank" activities to
include the acceptance of demand deposits and the making of consumer
-- but not commercial -- loans.  The Board granted the application,
explaining that since the subsidiary would not make commercial loans
it would "not be a bank within the meaning of the Bank Holding Company
Act" (Pet. App. 4a).  For that reason, the Board continued, U.S.
Trust's proposal did not run afoul of the Douglas Amendment:  "In this
situation, where the applicant will not make commercial loans in
Florida * * * the Board does not have the discretion to find that the
proposal falls within the prohibitions on interstate acquisitions
contained in section 3(d) of the Act, which only applies to the
acquisition of banks as defined in section 2(c) of the Act" (ibid.
(citation omitted)).

   Petitioners, who contested the U.S. Trust application before the
Board, sought review of the Board's order in the court of appeals,
arguing that the Florida subsidiary was subject to the Act's
limitations on interstate banking despite its failure to satisfy the
BHCA's two-part definition of a "bank." The court of appeals agreed
(Pet. App. 10a-29a), eschewing "(l)iteralism in statutory
interpretation" as, in this case, "contrary to an express purpose of
the Act" (id. at 17a).  The court first expressed its view that the
commercial lending prong was added to the Act's definition of "bank"
as a "technical amendment" that had been intended to affect only a
single institution (id. at 24a).  Against this background, the court
concluded that a literal application of the definition would "destroy
the important federal policy embodied in the Douglas Amendment -- a
federal policy which allows the state to choose for itself whether to
open its borders to out-of-state banks" (id. at 27a).  The court
therefore held that the Board should have denied the U.S. Trust
application under Section 5(b) of the BHCA (12 U.S.C. 1844(b)), which
authorizes Board action to "prevent evasions" of the Act (Pet. App.
27a-29a).  U.S. Trust sought certiorari from this ruling.

   2. While U.S. Trust's petition for certiorari was pending, this
Court decided Board of Governors v. Dimension Financial Corp., No.
84-1274 (Jan. 22, 1986).  In Dimension, the Court invalidated a Board
regulation that broadly defined the term "bank" for purposes of the
BHCA.  The regulation had read the "demand deposit" portion of the
Section 2(c) definition of "bank" to include any deposit that is
payable on demand as a matter of practice, even if not as a matter of
legal right;  it had also read Section 2(c)'s reference to "making
commercial loans" to include the purchase of certain money market
instruments.  See slip op. 2 (citing 12 C.F.R. 225.2(a)(1) (1985)).
The Court held that the regulation was inconsistent with the statutory
definition of the term "bank" (slip op. 3-11).  In particular, the
Court rejected the contention that the "commercial loan" portion of
the Section 2(c) definition had been intended to affect only one
institution, holding that "(t)he statute by its terms * * * exempts
from regulation (under the BHCA) all institutions that do not engage
in the business of making commercial loans" (slip op. 9-10 (emphasis
in original)).

   The Court also rejected the argument that its reading of the
statute was inconsistent with the purposes of the BHCA.  The Court
explained that "(t)he 'plain purpose' of legislation * * * is
determined in the first instance with reference to the plain language
of the statute itself" (slip op. 12).  And the Court noted that, "(if)
the Bank Holding Company Act falls short of providing safeguards
desirable or necessary to protect the public interest, that is a
problem for Congress" (id. at 13).

   The Court subsequently granted U.S. Trust's petition for certiorari
in this case, vacated the judgment of the court of appeals, and
remanded the case for reconsideration in light of Dimension (Pet. App.
45a).

   3. On remand, the court of appeals affirmed the Board's order (Pet.
App. 46a-52a), explaining that Dimension "squarely rejects the
reasoning behind (the) vacated opinion" (id. at 47a).  The court of
appeals found it "an elementary percept of statutory construction that
the definition of a term in the definitional section of a statute
controls the construction of that term wherever it appears throughout
the statute.  Thus, a depository institution which is not a bank as
defined in Section 1841(c) is similarly not a bank for purposes of the
Douglas Amendment" (id. at 51a (citation omitted)).  The court added
that "(i)f, as Dimension holds, the Federal Reserve Board is without
regulatory jurisdictin to regulate nonbank banks as 'banks' under the
Act, then it is without regulatory jurisdiction to prevent the
interstate proliferation of nonbank banks under the Douglas Amendment"
(ibid.).  While the court expressed concern that this result might
frustrate the BHCA's purposes, it added that Congress has the
responsibility to decide "whether it wishes to shepherd the nonbank
banks inside the regulatory pale" (id. at 52a).

                               ARGUMENT

   Petitioners appear to acknowledge that U.S. Trust's Florida
subsidiary is not a "bank" within the meaning of Section 2(c) of the
Act, the BHCA's definitional provision.  Given this Court's holding in
Board of Governors v. Dimension Financial Corp., supra, petitioners
could hardly contend otherwise.  They argue, however, that the
statutory definition of "bank" does not govern the use of that term in
the Douglas Amendment;  instead, they maintain that the Douglas
Amendments' restriction on the interstate acquisition of "additional
bank(s)" by bank holding companies is applicable even to
deposit-taking institutions that do not make commercial loans and
that, therefore, are not "banks" as defined in Section 2(c) of the
Act.  This contention, which has now been addressed (and rejected)
only by a single court of appeals, is entirely without merit and does
not warrant this Court's consideration.

   1. When Congress defines a statutory term with precision, it
generally is presumed that the definition controls the meaning of the
term wherever it appears in the statute.  See generally Amoco
Production Co. v. Gambell, No. 85-1239 (Mar. 24, 1987), slip op.
13-15;  Colautti v. Franklin, 439 U.S. 379, 392 n.10 (1979);  Atlantic
Cleaners & Dryers, Inc. v. United States, 286 U.S. 427, 433 (1932).
Here, Section 2(c) of the BHCA provides without limitation that
"'(b)ank' means any institution" that accepts demand deposits and
makes commercial loans.  By putting the definition in this form and by
placing it at the beginning of 12 U.S.C. Chapter 17 (which includes
the BHCA), Congress plainly intended Section 2(c)'s definition to
control throughout the BHCA, so that all of the Act's limitations on
the ownership and acquisition of banks apply only to institutions that
meet Section 2(c)'s two-pronged test.  And as petitioners obliquely
acknowledge (see Pet. 16-19), there is no indication in the
legislative history of the BHCA that Congress intended a different,
unwritten definition to apply to the term "bank" as it appears in the
Douglas Amendment.  /1/

   The statutory structure confirms that the Section 2(c) definition
of "bank" must apply to the use of that term in Section 3(d).  Section
3(a) of the Act (12 U.S.C. 1842(a)) requires Board approval prior to
the acquisition of a "bank." Section 3(d) -- the Douglas Amendment --
operates by prohibiting the Board from approving an interstate
acquisition of a "bank" unless the acquisition is authorized by state
statute.  Thus, the Douglas Amendment's restrictions on interstate
banking apply only to the acquisition of "banks" for which the Board's
prior approval is required under Section 3(a);  the interstate
acquisition of nonbanking entities, which is governed by Section 4, is
not subject to the Douglas Amendment's restrictions.  See Lewis v. BT
Investment Managers, Inc., 447 U.S. 27, 47 (1980).  In these
circumstances, it would be nonsensical to give the term "bank"
different meanings in Section 3(a) and (d).

   2. Even if it were somehow reconcilable with the statutory
langauge, petitioners' reading of the BHCA is foreclosed by Dimension.
 The Board regulation at issue in that case provided a definition of
"bank" that applied to all portions of the BHCA, including the Douglas
Amendment.  The Board's analysis was thus premised on the
understanding that the definition of "bank" in Section 2(c) dictates
the meaning of that term wherever it appears in any of the BHCA's
provisions.  Indeed, in promulgating the regulation the Board
explained that its interpretation of "bank" was intended to preserve,
among other things, the ban on interstate bank acquisitions imposed by
the Douglas Amendment (49 F.ed Reg. 836 (1984));  the interstate
effects of a decision setting aside the regulation were stressed by
the Board in its brief to this Court in Dimension (84-1274 Pet. Br.
12, 24), and the Board's concerns were acknowledged by this Court in
its decision (slip op. 5).  The Court, however, made no suggestion
that the Board has greater authority to regulate the acquisition of
"non-bank banks" by bank holding companies under the Douglas Amendment
than it has under other provisions of the BHCA.  To the contrary, the
Court stated flatly that institutions that do not engage in commercial
lending (and are therefore not "banks" within the meaning of Section
2(c)) are "exempt from regulation" under the Act (slip op. 9).  /2/

   Petitioners have offered no reason for the court to revisit this
issue.  They contend principally (Pet. 6-8) that the decision below is
inconsistent with the policy against interstate banking that they
believe to underlie the BHCA;  they also assert (Pet. 18-19) that a
1970 amendment of Section 2(c), which added the "commercial loan"
prong to the definition of "bank" (see Pub. L. No. 91-607, Section
101(c), 84 Stat. 1762), was intended to exclude only a single
institution from regulation under the Act.  The Court, however,
expressly rejected identical contentions in Dimension.  See slip op.
9-10, 12.  /3/ That is enough to dispose of petitioners' claims.

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   MICHAEL BRADFIELD

      General Counsel

   RICHARD M. ASHTON

      Associate General Counsel

   JAMES A. MICHAELS

      Senior Attorney Board of Governors of the Federal Reserve System

   MARCH 1987

   /1/ Petitioners cite a number of cases (Pet. 9-11) for the
unsurprising proposition that the same term may be given different
meanings in different portions of a statute if that plainly is
Congress's intent.  In each of the cases cited by petitioners,
however, there were compelling indications in the statutory background
that Congress intended such a reading of the statute.  See, e.g., Cass
v. United States, 417 U.S. 72, 76-84 (1974);  Atlantic Cleaners &
Dryers, 286 U.S. at 435.  There is no such evidence here.  Petitioners
attempt to put the best face on this lack of support for their
contentions, stating that "there is no evidence to suggest that
Congress intended the Douglas Amendment to be affected in any way by
the 1970 amendment to Section 2(c) (which added the commercial lending
prong to the definition of 'bank')" (Pet. 18 (footnote omitted)).  But
since the Douglas Amendment was part of the BHCA when the definition
was modified and the definition appears on its face to apply to the
entire BHCA, it surely is petitioners' obligation to offer specific
evidence that Congress wanted to limit the applicability of the
provision.

   /2/ Petitioners attempt to distinguish Dimension by arguing that
their reading of the Act would bring the Douglas Amendment into play
only when a "nonbank bank" -- an institution that is outside the
Section 2(c) definition because it either does not offer demand
deposits or does not make commercial loans -- is acquired by a bank
holding company that is already subject to regulation by the Board;
in contrast, petitioners continue, the Board regulation at issue in
Dimension would have converted any company that owned a nonbank bank
into a bank holding company (if that nonbank bank fell within the
Board's regulatory definition of "bank") (Pet. 11-13).  While this is
true, it is entirely beside the point.  The Court's decision in
Dimension turned on its reading of Section 2(c), not on the regulated
(or unregulated) status of the entities affected by the Board's
regulation.  Indeed, petitioners' reading would create an irrational
distinction by permitting institutions that are not bank holding
companies to, in petitioners' words, "acquire deposit-taking banks
across state lines" (Pet. 6);  it would prevent bank holding companies
from doing the same thing.

   /3/ Petitioners place great weight on the fact that the 1970
amendment's legislative history does not expressly mention the Douglas
Amendment (Pet. 18-19).  In fact, however, the legislative history
does not expressly mention any provision of the BHCA;  it simply
speaks generally of "exclud(ing) institutions that are not engaged in
the business of making commercial loans from the definition of bank."
S. Rep. 91-1084, 91st Cong., 2d Sess. 24 (1970).