morning honest morning is it please the court my name is jim good to be a and i are long with my colleagues to counsel table represent the commissioner of the california department of corporations in this matter as a housekeeping matter i would like to point out to the court as it already is where i'm sure that there are two important issues raised in this appeal both of which involve issues of consumer protection issues that i will address which involves core issues of federalism as well as consumer protection is whether the office of the council of the currency or the comptroller has exclusive regulatory authority over non bank state chartered corporations that also happens to be operating subsidiaries of national banks remaining issue which is whether or state regulation of operating subsidiaries does not threaten the national bank system the commissioner recognizes that pursuant to the national bank act the comptroller has regulatory authority over national banks however the very issues in this case focused on comptrollers claimed authority over non thinking state chartered corporations there's been no legal authority from the consul or wells fargo or national city indicating that consular had congressional authorization to can't do it at all actually no your honor i don't think that my position goes that far i think under nation's banks the consul of the currency in interpreting the incidental powers of the national banks pursuant to twenty four seventh's that they can engage in these activities through operating subsidiaries if it is convenient or useful to the banks it's for purposes of argument the permissible construction of that statute however to the extent that that regulation goes myself and of course i'd like to clarify state chartered as it is stated in this situation would mean corporate corporate entity it doesn't necessarily receive its corporate identity from california it could receive money from another national city mortgage company they voluntarily start licensor from the commissioner and only after they asserted that they would not comply with the statutory scheme under which they had obtained that license did we seek to revoke preemption analysis analysis i don't think that there's any disagreement between any of the parties that that is the proper analysis but prior to getting to the point of conflict preemption we need to analyze the regulations at issue and again i can and thinking activity through operating subsidiaries and it can have an effect that business on a national bank i don't wish to stand here today and say that the console or cannot go in and exercise any there they are exposed last actually your honor because they have separate assets and liabilities than the national bank therefore if something were to happen with the state chartered operating subsidiary you would not be able to reach the national in the charter for the entities you system is coming from california actually as i understand it one of these entities which is now disappear was a california corporation but the other one was right that's correct it does not matter to my argument honor whether or not there are state charges california or whether there are chartered corporations from another state my point is that they are not national banks and they don't have the same requirements in order to meet the qualifications to become a federally chartered national bank ying the comptroller that the national bank is going to conduct activities through an operating subsidiary or through an application first teacher but again they are not national bank in some instances for a new business that's going to be conducted or for a new operating subsidiary through which the bank has never operated before he would have to give his approval however in other instances it can be an after the fact notification by letter from to get back to my point your honour's chevron analysis instructor says that as i said before we need to look at whether or not there's a delegation of authority and i start position that there is no delegation of applying as chevron it's a two part test as this court is aware and the first question is whether congress has directly spoken to the precise question at issue and as with the delegation of authority we would contend that the congress has not spoken to the precise question at issue nowhere in the national bank act this congress never mention operating subsidiaries nowhere in the gramm we each blindly act does congress just pine or mention operating subsidiaries except to exclude operating  you that the console is an interpretation of the national bank act is not a permissible construction of the statutory scheme again nowhere does the national bank act or any other federal regulatory scheme speak to however even if you were fined for that the comptroller properly promulgated the regulations they are not inconsistent with state law and it does not press trace the purpose just for which national banks were organized for them to subject themselves to regulation of the state chartered operating subsidiaries for example acted before wells fargo home mortgage as well as national stadium mortgage voluntarily obtain licenses from the california corporations commission or they operate under these licenses respectively with regard to wells fargo home mortgage three years and national city mortgage five years prior to ever asserting that they were operating subsidiaries of the national bank and were not subject to the commissioner's jurisdiction it was only after the commissioner conducted an audit of both of these companies to which they voluntarily complied that we asked them to perform a further audit and to refund that was facing the mortgage industry is that state usury laws were in some cases for bidding the charging of interest at levels which were in fact the cost of money to the lenders and the history is follows where state usury laws require mortgage rates below market levels of interest mortgage loans in those states will not be readily available and those funds will flow to other states where market yields are readily available this artificial disruption of funds availability not only is harmful to potential homebuyers in states with such usury laws it also frustrates national housing policies and programs the committee analyzing this bill believe this should be a limited effect a consumer protection resolution of a problem in the real world the mortgage transaction which is the lender is going to fund at a particular time in the process the interest to the consumer is   in the actual world of escrow and mortgage transactions it was a line to which they had been performing and have been able to perform by and large they now challenge that the entire structure of the  people could contract for whatever they want i suppose the let me run a follow several regulations and so forth and have to be very i'm trying to find out why since the narrator are nouns and one reason why it might not be a writer on mt is that it was possible to collect the same amount of money understand i believe i can address the issue in this way the very short amount of time during which the statue will have any effect really all it does is determined when you can begin charging interest as opposed to say you can only charge zero for time i think that's that's wh my point i think your honor is that if the purpose of the monitor control like this one is use the terms expressed the leavening the rate or amount of interest which you will state usury ceilings then a situation where a statute addressed to a time bank but it's only the control of the currency that can enforce that state law against national banks and that's because congress has provided in section forty four that a national bank shall not be subject to any  correctly if you if the question is does this law apply to the national bank that's a conflict preemption typically there may be some very narrow fields where we would say there is some nature of field preemption just to the audit just so far that audit in this case it was directing the institution to review through two years of mortgage applications at a time when mortgage refinancing was its height and to have them focus on this particular aspect of particular aspects of that operation to the exclusion or not rather tha i think that we have always i think on both sides try to accommodate each other that we are not our interest is not to pick a fight with the states and we have issues that come up  trying to resolve them i think more recently the issues have come up more frequently and that we needed clarification i should make a point that there are areas that are even for national bank takes a week before the mortgage debts are recorders we would not be clear because the violations i don't think we would find that that would be a type of interference or regulation of the national bank operating subsidiary the preemption of the california party m statute and the retaliation issue i will of course be guided by the issues that will be both helpful to the and revoke the license because we didn't need it we have a license from the office of the comptroller of the currency to exercise national banking powers that is mortgage lending through an op sub and it's a a stab when you've the kind of preemption we're dealing with here and it is conflict preemption the best single source to understand it is the barnett bank case the unanimous decision of the supreme court which tries to i didn't hear much bank barnett national bank is exercising one of its powers which can be an express or implied power an incidental power and i think it's conceded in this case that was i'm sorry i'm losing it maybe i should stop and then there was a little bit of back and is to engage in any national banking activity through an office of through an operating subsidiary that's conceded that so that's not an issue in this case so what the barnett bank case holds is that when there is a federal banking power expressed or incidental the general presumption is that congress would not want the states to prevent or significantly interfere with the exercise of long series of cases of the supreme court and other courts of appeals recognizing that if it is a prevention or significant interference with the exercise of the national bank power then the state was preempted and thrifts federal us and also federal reserve member banks that there are these operating subsidiaries so that's something that banks are allowed to have the practice has been they are they they are chartered corporations and position i might be able to do that i mean no status try to try to do that all the o c c and saying yes look you know we will regulate the federally authorized banking activities when a national bank chooses to exercise those activities through this office of which is a state chartered corporation all we're talking about today is whether the state banking regulator can say no we're going to great delight those banking activities  current problem i think i think if that would be one of those issues that state law would control and again that's that's not an issue that's before this court but i would say that the the o c c treats the ops as a and it's and the judge person asked a question way back at the beginning saying you know i'm not sure about this middle ground that the state is staking out saying look it's ok to have operating subsidiaries that's all right and it's ok for the o c c to regulate those just as they would regulate the national bank itself but we'd the state want to come in and also regulate perhaps have different regulations perhaps disagree with the o says this is just a choice california is made that it would not apply to national banks although there is one a provision of the state law that doesn't have an express exception for national banks so perhaps for that one the state would say yes this party of interest requirement applies to all and they all going back to our back and forth the o c c well in force all non preempted state laws against both national banks and their operating subsidiaries now we get to this question of whether this party interest law you know is preempted by this federal law we call it did it's the acronym for depositary institutions that cetera  and so that is a separate question and if we if we're wrong about that if it's not preempted then it doesn't apply certainly applies to the operating subsidiary expressway that's that's what state law says and the o c c with that in force that against the to well i mean it does tell you what the state law says you can only before it was invented the version that we're talking about here so as you can only charge interest for one day before the mortgage your deed of trust is complicated it's on page forty eight of our opening brief my understanding is that under this was mentioned briefly under the truth in lending act and under regulations v you must there 's a sort of order in which this has to happen the money has to come into escrow you have to set the rate of interest which then can't be changed it's got to be fixed and my understanding is that although i did i'm not sure i've and i think in a way it goes right to the heart of this issue i mean in a way it's sort of picayune because usually you're going to be talking about i mean most of the time these things do get recorded promptly as i understand it most of the time if they don't you're talking about a couple of days or a has i know although i would like to put on the record that both banks don't charge interest and told the borrower actually gets the use of the money and i think frankly it's a harder question on whether it is preempted because you could get into an issue about well if you or doesn't even have use of that money is that even interest if it's sitting in escrow someplace i mean i think ultimately if pushed i would say it is an escrow the bank doesn't have the use of the money neither does the borrower it's sort of in limbo it's in the middle ground so if pressed i would argue yes that's if there unforeseeable delays that would also be preempted but it's i acknowledge that's a harder question it's not in this case but you know the recording is not several points hungry thought on your honor's number one was the issue of whether or not the consular can enforce not state law first of all they contend that they have that authority but still the comptroller would exercise their discretion as to whether or but with regard to the operating subsidiaries who are licensed or biassed then we have an entire statutory scheme that we seek to enforce that the california legislature has an actor myself so many feel it really doesn't make a difference i would say that it would make a difference to the consumer because there may be a different set of laws applicable to the operating subsidiary operating in the state borders then those applicable to the national bank but that is somewhat just from i think what the controllers regulations are saying they say that everything that applies to national bank person's point is mr sneed related that thanks can't engage in this activity without the state license or that that is california's contention that the banks wouldn't be able to do this but as pointed out by judge for lawn in fact wells fargo has  ed this lending activity into the national bank which would be free to do while the license application was pending the judge was on also brought us the new lawsuit and mr sneed responded that the new regulations sharpened and in the briefs it's been referred to as clarified and in specific we're talking about seven point four zero zero six i would contend that prior to the problem of that regulation which was august first of two thousand and to the retaliation issue when he said that wells fargo's position was in just a position they wanted to maintain the status quo but yet they stated that they would not comply with the statutory scheme under which they were licensed therefore i contend that the nine