Source: https://www.legalcrystal.com/case/105637/securities-indus-assn-vs-frs
Timestamp: 2018-05-24 00:49:24
Document Index: 484556342

Matched Legal Cases: ['§ 21', '§ 16', '§ 21', '§ 16', '§ 24', '§ 21', '§ 16', '§ 21', '§ 77', '§ 78', '§ 79', '§ 77', '§ 77', '§ 771', '§ 24', '§ 16', '§ 24', '§ 16', '§ 16', '§ 21', '§ 21', '§ 96', '§ 16', '§ 3', '§ 378', '§ 21', '§ 20', '§ 377', '§ 21', '§ 21', '§ 16', '§ 16', '§ 16', '§ 16', '§ 21', '§ 16', '§ 21', '§ 16', '§ 21', '§ 16', '§ 21', '§ 16', '§ 5', '§ 16', '§ 16', '§ 2', '§ 77', '§ 21', '§ 16', '§ 16', '§ 16', '§ 16', '§ 16', '§ 96']

Securities Indus Assn Vs Frs - Citation 105637 - Court Judgment | LegalCrystal
LegalCrystal Citation legalcrystal.com/105637
Case Number 468 U.S. 137
securities indus. assn. v. frs - 468 u.s. 137 (1984) u.s. supreme court securities indus. assn. v. frs, 468 u.s. 137 (1984) securities industry association v. board of governors of the federal reserve system no. 82-1766 argued march 21, 1984 decided june 28, 1984 468 u.s. 137 certiorari to the united states court of appeals for the district of columbia circuit syllabus section 16 of the banking act of 1933 (act), commonly known as the glass-steagall act, prohibits commercial banks from underwriting "securities or stock," and § 21 prohibits them from marketing "stocks, bonds, debentures, notes, or other securities." when bankers trust co., a state commercial bank that is a member of the federal reserve system,.....
Securities Indus. Assn. v. FRS - 468 U.S. 137 (1984)
U.S. Supreme Court Securities Indus. Assn. v. FRS, 468 U.S. 137 (1984)
Held: Because commercial paper falls within the plain language of the Act, and because the inclusion of commercial paper within the terms of the Act is fully consistent with its purposes, commercial paper is a "security" under the Act, and therefore is subject to its proscriptions. Pp. 468 U. S. 142 -160.
(a) Although the Board's interpretation of the Act is entitled to substantial deference, this case presents considerations that counsel against giving full deference to that interpretation. The Board at the administrative level took the position that commercial paper was not a "security" within the meaning of the Act, and that therefore it was unnecessary to examine the dangers that the Act was intended to eliminate, but before this Court, the Board insisted that Bankers Trust's activities involved none of such dangers. Post hoc rationalizations by counsel for agency action are entitled to little deference. Pp. 468 U. S. 142 -144.
(b) In enacting the Act, Congress' worries about commercial-bank involvement in investment bank activities reflected two general concerns. The first of these concerns was that a commercial bank might experience large losses from investing its funds in speculative securities. In addition to this concern, however, Congress focused on the conflicts of interest that arise when a commercial bank goes beyond the business of acting as a fiduciary or managing agent and develops a pecuniary interest in marketing securities. The Act's design reflects the congressional perception that some commercial and investment banking activities are fundamentally incompatible, and justify a strong prophylaxis. Pp. 468 U. S. 144 -148.
(c) There is nothing in the language of either § 16 or § 21 to suggest a narrow reading of the word "securities," i.e., that, because the word appears in a phrase that includes "stocks, bonds, [and] debentures," the Act's prohibitions apply only to "notes [and] other securities" that resemble the enumerated instruments. To the contrary, the breadth of the term "securities" is implicit in the fact that the antecedent language encompasses not only equity securities, but also securities representing debt. While the Act does not define the terms "notes" or "other securities," there is considerable evidence, particularly with respect to other Acts enacted at the same time that do define "security" to include commercial paper, to indicate that the ordinary meaning of the terms "securities" and "notes" as used in the Act encompasses commercial paper. The Board's interpretation effectively converts a portion of the Act's broad prohibitions into a system of administrative regulation, since, by concluding that commercial paper is not covered by the Act, the Board in effect has obtained authority to regulate the marketing of commercial paper under its general supervisory power over member banks. Pp. 468 U. S. 148 -154.
(d) By focusing entirely on the nature of the financial instrument and ignoring the bank's role in the transaction, the Board's "functional analysis" misapprehends Congress' concerns with commercial bank involvement in marketing securities. The facts that commercial paper is relatively low risk, that commercial banks traditionally have acquired commercial paper for their own accounts, or that commercial paper is sold largely to "sophisticated" investors, do not justify the Board's interpretation of the Act. There is little evidence to suggest that Congress intended the Act's prohibitions on underwriting to depend on the safety of particular securities. The authority to discount commercial paper is very different from the authority to underwrite it, and the Act admits of no exception to the prohibition on commercial bank underwriting according to the particular investment expertise of the customer. Pp. 468 U. S. 154 -160.
BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J., and WHITE, MARSHALL, POWELL, and REHNQUIST, JJ., joined. O'CONNOR, J., filed a dissenting opinion, in which BRENNAN and STEVENS, JJ., joined, post, p. 468 U. S. 160 .
During 1978, Bankers Trust Company (Bankers Trust), a New York-chartered member bank of the Federal Reserve System, began serving as agent for several of its corporate customers in placing their commercial paper [ Footnote 1 ] in the commercial paper market. Petitioners, the Securities Industry Association (SIA), a national securities industry trade association, and A. G. Becker Inc. (Becker), a dealer in commercial paper, informally expressed concern to the Board about Bankers Trust's commercial paper activities. SIA and Becker subsequently petitioned the Board for, among other things, a ruling that Bankers Trust's activities are unlawful under §§ 16 and 21 of the Act, 12 U.S.C. §§ 24 Seventh and 378(a)(1). Section 16 prohibits commercial banks from underwriting "securities or stock," while § 21 prohibits them from marketing "stocks, bonds, debentures, notes, or other securities." Petitioners asserted that Bankers Trust's activities violated both § 16 and § 21.
No. 83-614, Securities Industry Assn. v. Board of Governors of Federal Reserve System, post at 468 U. S. 217 . We also have made clear, however, that deference is
not to be a device that emasculates the significance of judicial review. Judicial deference to an agency's interpretation of a statute "only sets the framework for judicial analysis; it does not displace it.'" United States v. Vogel Fertilizer Co., 455 U. S. 16 , 455 U. S. 24 (1982), quoting United States v. Cartwright, 411 U. S. 546 , 411 U. S. 550 (1973). A reviewing court
FEC v. Democratic Senatorial Campaign Committee, 454 U. S. 27 , 454 U. S. 32 (1981).
Although these principles establish in general terms the appropriate standard of review, this case presents an additional consideration that counsels against full deference to the Board. At the administrative level, the Board took the position that commercial paper was not a "security" within the meaning of the Act, and that, therefore, it did "not appear necessary to examine the dangers that the Act was intended to eliminate." Board Statement, App. 140A. [ Footnote 2 ] Before this Court, however, the Board appears to have changed somewhat the nature of its argument. The Board's counsel now insists that the activities of Bankers Trust "involv[e] none of the hazards' that this Court identified" as the concerns at which the Act is aimed. Brief for Respondents 40. We previously have stated that post hoc rationalizations by counsel for agency action are entitled to little deference:
Investment Company Institute v. Camp, 401 U. S. 617 , 401 U. S. 628 (1971); see also Burlington Truck Lines, Inc. v. United States, 371 U. S. 156 , 371 U. S. 168 -169 (1962). As a result, the Board's presentation here of the policies behind the Act as they apply to this case is of less significance than it would be if it had occurred at the administrative level. Because of this apparent shift, moreover, the contours of the Board's present position are somewhat unclear; much of the Board's argument now addresses the particular characteristics of the commercial paper in this case, apparently leaving open the possibility that commercial paper with different characteristics would qualify as a "security" and be subject to the Glass-Steagall Act's proscriptions. See Brief for Respondents 33-44. To the extent that the Board has changed its position from that adopted at the administrative level, its interpretation is entitled to less weight.
In Camp, this Court explored at some length the congressional concerns that produced the Glass-Steagall Act. Congress passed the Act in the aftermath of the banking collapse that produced the Great Depression of the 1930's. The Act responded to the opinion, widely expressed at the time, that much of the financial difficulty experienced by banks could be traced to their involvement in investment banking activities both directly and through security affiliates. At the very least, Congress held the view that the extensive involvement by commercial banks had been unwise; some in Congress concluded that it had been illegal. [ Footnote 3 ] Senator Glass stated bluntly
Congressional worries about commercial bank involvement in investment bank activities reflected two general concerns. The first was the inherent risks of the securities business. Speculation in securities by banks and their affiliates during the speculative fever of the 1920's produced tremendous bank losses when the securities markets went sour. [ Footnote 4 ] In addition to the palpable effect that such losses had on the assets of affected banks, they also eroded the confidence of depositors in the safety of banks as depository institutions. This crisis of confidence contributed to the runs on the banks that proved so devastating to the solvency of many commercial banks.
Camp, 401 U.S. at 401 U. S. 630 . The Glass-Steagall Act reflects the 1933 Congress' conclusion that certain investment banking activities conflicted in fundamental ways with the institutional role of commercial banks.
Congress feared that a bank might even make unsound loans to companies in whose securities the bank has a stake or to a purchaser of securities that the bank seeks to distribute. Ibid. Alternatively, a bank with loans outstanding to a company might encourage the company to issue securities through the bank's distribution system in order to obtain the funds needed to repay bank loans. 75 Cong.Rec. 9912 (1932) (remarks of Sen. Bulkley). Congress also faced some evidence that banks had misused their trust departments to unload excessive holdings of undesirable securities. Camp, 401 U.S. at 401 U. S. 633 ; 1931 Hearings, pt. 1, p. 237.
The Act's design reflects the congressional perception that certain investment banking activities are fundamentally incompatible with commercial banking. After hearing much testimony concerning the appropriate form of a legislative response to the problems, [ Footnote 5 ] Congress rejected the view of those who preferred legislation that simply would regulate the underwriting activities of commercial banks. Congress chose instead a broad structural approach that would
Investment Company Institute, 450 U. S. 46 , 450 U. S. 70 (1981) (ICI). [ Footnote 6 ] Such an approach was not without costs in terms of efficiency and competition, but the Act reflects the view that the subtle risks created by mixing the two activities justified a strong prophylaxis. Camp, 401 U.S. at 401 U. S. 630 .
Neither the term "notes" nor the term "other securities" is defined by the statute. "This silence compels us to start with the assumption that the legislative purpose is expressed by the ordinary meaning of the words used.'" Russello v. United States, 464 U. S. 16 , 464 U. S. 21 (1983), quoting Richards v. United States, 369 U. S. 1 , 369 U. S. 9 (1962). Respondents do not dispute that commercial paper consists of unsecured promissory notes and falls within the general meaning of the term "notes." See Board Statement, App. 131A; see also Brief for Respondents 2. Respondents assert, however, that the context in which the term is used suggests that Congress
401 U.S. at 401 U. S. 635 . There is, moreover, considerable evidence to indicate that the ordinary meaning of the terms "security" and "note," as used by the 1933 Congress, encompasses commercial paper. Congress enacted the Glass-Steagall Act as one of several pieces of legislation collectively designed to restore public confidence in financial markets. See the Banking Act of 1933, ch. 89, 48 Stat. 162 (codified as amended in scattered sections of 12 U.S.C.); the Securities Act of 1933, 48 Stat. 74, 15 U.S.C. § 77a et seq.; the Securities Exchange Act of 1934, 48 Stat. 881, 15 U.S.C. § 78a et seq.; and the Public Utility Holding Company Act of 1935, 49 Stat. 803, 15 U. S.C. § 79a et seq. In each of these other statutes, the definition of the term "security" includes commercial paper,
and each statute contains explicit exceptions where Congress meant for the provisions of an Act not to apply to commercial paper. [ Footnote 7 ] These explicit exceptions demonstrate congressional cognizance of commercial paper and Congress' understanding that, unless modified, the use of the term "security" encompasses it.
The Securities Act of 1933, for example, defines the term "security" to include "any note." 15 U.S.C. § 77b(1). During the hearings on that Act, Senator Glass expressed dissatisfaction with that definition because it plainly did encompass commercial paper. With the support of the Board, he sought to amend the definition of the term to exclude commercial paper, [ Footnote 8 ] but Congress chose instead to exempt commercial paper from only the registration requirements of the statute, see 15 U.S.C. § 77c(a)(3), [ Footnote 9 ] while preserving application of the statute's antifraud provisions to all commercial paper "securities." §§ 771, 77q(c). Congress passed the Glass-Steagall Act two weeks later, and throughout consideration of that Act by the same Committees of the same Congress, the eponymous Senator Glass displayed no
"Had Congress intended so fundamental a distinction, it would have expressed that intent clearly in the statutory language or the legislative history. It did not do so, however, and it is not this Court's function 'to sit as a super-legislature,' Griswold v. Connecticut, 381 U. S. 479 , 381 U. S. 482 (1965), and create statutory distinctions where none was intended."
American Tobacco Co. v. Patterson, 456 U. S. 63 , 456 U. S. 72 , n. 6 (1982).
ICI, 450 U.S. at 450 U. S. 66 . The concern about commercial bank underwriting activities derived from the perception that the role of a bank as a promoter of securities was fundamentally incompatible with its role as a disinterested lender and adviser. This Court explained in Camp:
401 U.S. at 401 U. S. 634 . At the administrative level, the Board expressly chose not to consider whether these concerns are present when a commercial bank has a pecuniary interest in promoting commercial paper. Board Statement, App. 140A. Although the Board indicates before this Court that such activities do not implicate the concerns of the Act, we are unpersuaded by this belated assertion. In adopting the Act, for example, Congress concluded that a bank's "salesman's interest" in an offering "might impair its ability to function as an impartial source of credit." Camp, 401 U.S. at 401 U. S. 631 . In the commercial paper market, where the distribution of an issue depends heavily on the creditworthiness of the issuer, a bank presumably can enhance the marketability of an issue by extending backup credit to the issuer. Similarly, as a commercial bank finds itself in direct competition with other commercial paper dealers, it may feel pressure to purchase unsold notes in order to demonstrate the reliability of its distribution system, even if the paper does not meet the bank's normal credit standards. Recognizing these pressures, this Court stated in Camp:
Id. at 401 U. S. 637 .
that the bank's depositors might lose confidence in the bank if the issuer should default on its obligations. See id. at 401 U. S. 631 ; 1931 Hearings, pt. 7, p. 1064. This concern would appear fully applicable to commercial paper sales, because banks presumably will use their depositor lists as a prime source of customers for such sales. To the extent that a bank sells commercial paper to large bank depositors, the result of a loss of confidence in the bank would be especially severe.
More importantly, however, there is little evidence to suggest that Congress intended the Act's prohibitions on underwriting to depend on the safety of particular securities. Stocks, bonds, and debentures exhibit the full range of risk; some are less risky than many of the loans made by a bank. And while the risk features of a security presumably affect whether it qualifies as an "investment security" that a commercial bank may purchase for its own account, [ Footnote 10 ] the Act's underwriting prohibition displays no appreciation for the features of a particular issue; the Act just prohibits commercial banks from underwriting any of them, with an exception for certain enumerated governmental obligations that Congress specifically has chosen to favor. See 12 U.S.C. § 24 Seventh. The Act's prophylactic prohibition on underwriting reflects Congress' conclusion that the mere existence of a securities operation, " no matter how carefully and conservatively run, is inconsistent with the best interests'" of the bank as a whole. 75 Cong.Rec. 9913 (1932) (remarks of Sen. Bulkley, quoting a statement issued by the Bank of Manhattan Trust Co.).
In this regard, the Board's focus on the fact that commercial banks traditionally have acquired commercial paper for their own accounts is beside the point. It is clearly true, as the Board asserts before this Court, that Congress designed the Glass-Steagall Act to cause banks to invest more of their funds in short-term obligations like commercial paper, instead of in longer term and more speculative securities. By so doing, Congress hoped to enhance the liquidity of funds and protect bank solvency. But the authority to discount commercial paper is very different from the authority to underwrite it. The former places banks in their traditional role as a prudent lender. The latter places a commercial bank in the role of an investment banker, which is precisely what Congress sought to prohibit in the Act. [ Footnote 11 ] See Note,
to be the first of that kind since the passage of the Act. The history of commercial bank involvement in commercial paper prior to the Act is not well documented; evidently, commercial banks occasionally dealt in commercial paper, but their involvement was overwhelmingly in the role of discounter, rather than dealer. See R. Foulke, The Commercial Paper Market 108 (1931); A. Greef, The Commercial Paper House in the United States 63, 403-405 (1938). Since enactment of the Act, however, there is no evidence of commercial bank participation in the commercial paper market as a dealer. The Board has not offered any explanation as to why commercial banks in the past have not ventured to test the limits of the Act's prohibitions on underwriting activities. Although such behavior is far from conclusive, it does support the view that, when Congress sought to "separat[e] as completely as possible commercial from investment banking," ICI, 450 U.S. at 450 U. S. 70 , the banks regulated by the Act universally recognized that underwriting [ Footnote 12 ] commercial paper falls on the investment banking side of the line.
commercial paper is not a "security" under, and hence is not subject to the proscriptions of, §§ 16 and 21 of the Glass-Steagall Act, 48 Stat. 184, 189, as amended, 12 U.S.C. §§ 24 Seventh and 378(a)(1). The area of banking law in which this question arises is as specialized and technical as the financial world it governs, and the relevant statutes are far from clear or easy to interpret. The question is accordingly one on which this Court must give substantial deference to the Board's construction. Because of the Board's expertise and experience in this complicated area of law, and because of its extensive responsibility for administering the federal banking laws, the Board's interpretation of the Glass-Steagall Act must be sustained unless it is unreasonable. No. 83-614, Securities Industry Assn. v. Board of Governors of Federal Reserve System, post at 468 U. S. 217 , and n. 16; Investment Company Institute v. Camp, 401 U. S. 617 , 401 U. S. 626 -627 (1971); See also Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 , 467 U. S. 844 -845 (1984); Board of Governors of Federal Reserve System v. Investment Company Institute, 450 U. S. 46 , 450 U. S. 56 -58 (1981); FEC v. Democratic Senatorial Campaign Committee, 454 U. S. 27 , 454 U. S. 39 (1981).
Appeals or of the Solicitor General, to which deference is due. It is the Board that has the experience, expertise, and responsibility that require us to give it "considerable deference in its interpretation of the statute." United States v. Mitchell, 445 U. S. 535 , 445 U. S. 550 (1980) (WHITE, J., dissenting). [ Footnote 2/1 ]
The language of §§ 16 and 21 of the Glass-Steagall Act makes it clear that, in considering whether the Act prohibits a covered bank [ Footnote 2/2 ] from selling third-party commercial paper, the threshold issue is whether commercial paper is a "security" within the meaning of those two sections. See Investment Company Institute v. Camp, supra, at 401 U. S. 634 -635. If it is not, then commercial paper, which is a debt, rather than an equity instrument, is not subject to § 16's regulation of commercial bank transactions in "securities and stock." [ Footnote 2/3 ] Nor
is it subject to § 21's regulation of transactions in "stocks, bonds, debentures, notes, or other securities." (Emphasis added.) [ Footnote 2/4 ] Section 21's use of the word "other" implies that no debt instrument is within the scope of the section unless it is also a "security."
450 U.S. at 450 U. S. 62 -63. Moreover, § 21 itself contains a proviso intended
5 V. DiLorenzo, W. Schlichting, T. Rice, & J. Cooper, Banking Law § 96.02[2], p. 96-15 (1981) (footnote omitted). See H.R.Rep. No. 742, 74th Cong., 1st Sess., 16 (1935) (hereinafter H.R.Rep. No. 742); S.Rep. No. 1007, 74th Cong., 1st Sess., 15 (1935) (hereinafter S.Rep. No. 1007). [ Footnote 2/5 ] Indeed, petitioners concede that §§ 16 and 21 proscribe the same securities activities by commercial banks. See Brief for Petitioner A. G. Becker Inc. 24; Brief for Petitioner Securities Industry Association 12. For this reason, the language of both provisions must be examined to determine the intended coverage of the Glass-Steagall Act.
Commercial Code § 3-104, 2 U.L.A. 17 (1977); Black's Law Dictionary 956 (5th ed.1979); G. Munn & F. Garcia, Encyclopedia of Banking and Finance 724-725 (8th ed.1983), it is also used, more narrowly, to refer to a particular kind of capital-raising debt instrument distributed under an indenture agreement, like bonds or debentures but of shorter maturity, see id. at 725 ("The term note also is sometimes applied to short-term bonds . . ."); 1 A. Dewing, The Financial Policy of Corporations 178 (5th ed.1953). [ Footnote 2/6 ] Commercial paper, which consists of
12 U.S.C. § 378(a)(1). [ Footnote 2/7 ] In short, petitioners' reading of § 21 makes nonsense of the statutory language, and it therefore cannot be correct. The Board's reading, the only alternative to petitioners', gains considerable support from this conclusion.
p. 468 U. S. 207 , we rely on the " familiar principle of statutory construction that words grouped in a list should be given related meaning'" to support our conclusion that the Board reasonably construed the term "public sale" in § 20 of the Glass-Steagall Act, 12 U.S.C. § 377, "to refer to the underwriting activity described by the terms that surround it." Post at 468 U. S. 218 (quoting Third National Bank v. Impac, Ltd., 432 U. S. 312 , 432 U. S. 322 (1977)). The same principle is relevant in this case. That stocks, bonds, and debentures are all instruments purchased for investment purposes suggests that "notes" should be read to refer only to instruments similarly purchased for investment purposes. More specifically, the listing of bonds, debentures, and notes as the three "securities" (as opposed to "stock") named in § 21 suggests that the ambiguity in "notes" should be resolved, as the Board has done, by reading the term to refer to instruments similar in character to bonds and debentures. In sum, the Board's position makes good sense of § 21's list of financial instruments by giving the items in the list related meanings.
Section 16 flatly forbids covered banks to purchase "securities and stock" for their own accounts, but it makes a limited exception for "investment securities." See n. 3, supra. [ Footnote 2/8 ] It
is undisputed that commercial banks may purchase commercial paper for their own accounts. [ Footnote 2/9 ] Hence, if commercial paper is a "security" within the meaning of § 16, it must be an "investment security." To put the same point in the reverse order, if commercial paper is not an "investment security," it cannot be a security covered by § 16 at all: otherwise, contrary to what even petitioners acknowledge to be so, banks could not buy it for their own accounts. The Board concluded that commercial paper is not an "investment security," and therefore is not a "security," under § 16, App. to Pet. for Cert. 69a-74a, and that conclusion is, at the very least, a reasonable one. Petitioners nowhere dispute the conclusion that commercial paper is not an investment security; indeed, they effectively concede that it is correct. See Tr. of Oral Arg. 7.
paper was regarded as the making of a short-term loan, rather than as an investment. [ Footnote 2/10 ] Indeed, as the Board pointed out,
from underwriting any "issue of securities," but the proviso permitted the purchase of "investment securities" subject to the regulation of the Comptroller of the Currency. [ Footnote 2/11 ] Thus, the original version of § 16 simply does not apply to any instrument, like commercial paper, that is not an investment security. In 1935, Congress altered this language, but it did so simply
proviso in § 21, see n. 5, supra, enacted into law in 1935 along with the amendment to § 16, refers only to "investment securities" insofar as it addresses banks' "dealing in, underwriting, purchasing, and selling"; yet it is clear, and it is conceded, that the proviso was intended to make § 21's prohibitions coextensive with those of § 16 with respect to all securities activities. See H.R.Rep. No. 742, p. 16 (amendment makes clear that § 21 "does not prohibit any financial institution or private banker from engaging in the securities business to the limited extent permitted to national banks under [§ 16]"); S.Rep. No. 1007, p. 15 (amendment provides that § 21 "should not be construed as prohibiting banks, bankers, or financial institutions from engaging in securities activities within the limits expressly permitted in the case of national banks under [§ 16]"). Moreover, § 5(c) of the Glass-Steagall Act likewise refers only to "investment securities and stock", [ Footnote 2/12 ] yet that provision, as petitioners concede, makes § 16 of the Glass-Steagall Act applicable in full to "state member banks" like the Bankers Trust Company, see Brief for Petitioner A. G. Becker Inc. 2, n. 2; Brief for Petitioner Securities Industry Association 3, n. 3. All of these congressional enactments presuppose that Congress understood "securities" and "investment securities" to refer to the same class of debt instruments, a class that excludes commercial paper.
debates leading up to the enactment of the Glass-Steagall Act, Congress focused its attention on commercial banks' participation in the markets for long-term and speculative securities, and commercial paper was distinguished from the investment securities that Congress was worried about. See S.Rep. No. 77, supra, n. 8, at 4, 8, 9; 75 Cong.Rec. 9904, 9909, 9910, 9912 (1932). [ Footnote 2/13 ] Moreover, although commercial banks' purchasing activities were a major subject of congressional concern, and although commercial banks were the dominant buyers of commercial paper at the time, no one in Congress, as far as anything brought to this Court's attention shows, ever adverted to banks' commercial paper activities as contributing to the difficulties at which the Act was aimed. See App. to Pet. for Cert. 75a-76a. Thus, the legislative history shows Congress to have been concerned with commercial banks' involvement with investment instruments, as the Board contends, and not with their involvement with commercial paper.
In sum, the language of §§ 16 and 21 strongly supports the Board's interpretation. Indeed, petitioners have suggested no other construction that can be accommodated by the language of the statute. Since the legislative history makes it impossible to argue that Congress intended something contrary to the statutory language, the Board's conclusion about legislative intent concerning commercial paper appears to be compelled by statute. In any event, it is certainly "a reasonable construction of the statutory language, and is consistent with legislative intent." No. 83-614, Securities Industry Assn. v. Board of Governors of Federal Reserve System, post at 468 U. S. 217 .
Petitioners advance several arguments in an effort to demonstrate the error of the Board's reading of the Glass-Steagall Act, but these arguments are unavailing. It is worth noting at the outset that I have no quarrel with the Court's extensive discussion of the general policies behind the Glass-Steagall Act. Ante at 468 U. S. 144 -148. None of that discussion, however, speaks to the threshold question whether commercial paper is among the "securities" to which Congress thought those policies would apply when it adopted the Act. For all of the reasons given above, the Board's negative answer to that question is all but mandated by the statutory language, and is not contradicted by anything in the legislative history. The Board came to the reasonable conclusion that Congress simply had no intention to apply its policies to commercial paper.
are enacted at about the same time. In this case, the argument from other statutes has little or no weight. Petitioners, who make this argument entirely in the abstract, offer no reason to think that Congress specifically intended "security" to have the same meaning in the Glass-Steagall Act and the securities laws, and the first part of this opinion shows that there are many reasons to think otherwise. In addition, the securities laws' definitions of "security" include some instruments that plainly do not constitute securities under the Glass-Steagall Act. For example, bankers' acceptances are securities under § 2(1) of the Securities Act of 1933, 48 Stat. 74, as amended, 15 U.S.C. § 77b(1), yet commercial banks have long bought and sold and dealt in bankers' acceptances as a proper part of their commercial banking, the Board having determined in 1934 that bankers' acceptances were not securities under the Glass-Steagall Act. See App. to Pet. for Cert. 81a. [ Footnote 2/14 ]
That the term "securities" should have different meanings in the different statutes makes good sense. The purposes of the banking and securities laws are quite different. The Glass-Steagall Act was designed to protect banks and their depositors. See Board of Governors of Federal Reserve System v. Investment Company Institute, 450 U.S. at 450 U. S. 61 ; 75 Cong.Rec. 9913-9914 (1932) (remarks of Sen. Bulkley). The securities laws were designed more generally to protect investors and the general public. See United Housing Foundation, Inc. v. Forman, 421 U. S. 837 , 421 U. S. 849 (1975).
there is no single set of such characteristics that are common features of stocks, bonds, and debentures, the items listed in § 21 that the Board takes as the starting point for its interpretation. This argument, however, mistakenly places "stocks," on the one hand, and "bonds" and "debentures," on the other, into a single class. Section 16's reference to "securities and stock" establishes that the Glass-Steagall Act distinguishes two classes -- "securities," which includes only (though not necessarily all) debt instruments, such as bonds and debentures; and "stock," which includes only equity instruments. The Board's interpretation of "notes" accordingly need assimilate the term only to the class that includes bonds and debentures, not the class that consists of stock, in order to justify reliance on the canon of statutory construction that words placed together should be given a related meaning. See supra at 468 U. S. 166 -167. The Board's interpretation, which reads "notes" as referring to short-term debt instruments, like bonds and debentures, issued under indenture agreements, does just that.
There is simply no escaping some kind of functional analysis to separate the commercial and investment banking worlds in particular cases, which petitioners acknowledge is at least one chief aim of the Glass-Steagall Act. As noted above, see supra at 468 U. S. 165 -169, the language of §§ 16 and 21 cannot be read in the sweeping fashion suggested by petitioners: otherwise, those provisions would prohibit concededly permitted commercial bank involvement with a variety of instruments such as commercial paper. Petitioners have suggested no way to make the distinctions needed to give sense to the statutory language that does not involve a functional analysis of what constitutes investment banking and what constitutes commercial banking. For example, petitioners have suggested no way to distinguish the "discounting and negotiating" of "promissory notes," permitted by the National Bank Act, from the "purchasing" of "notes," prohibited by §§ 16 and 21 of the Glass-Steagall Act, a distinction that their position requires them to make. It is hard to imagine how that distinction might be drawn without using a "functional" approach to defining the difference between the commercial and investment banking worlds.
The Court suggests that § 16's reference to the "business of dealing in securities and stock" means that 516 does not flatly prohibit covered banks from purchasing securities and stock for their own accounts, except as authorized by the proviso, but only from the "business of dealing" in them. Ante at 468 U. S. 158 -159. Not even petitioners, however, dispute the proposition that § 16 constitutes a flat ban on purchasing, subject to the proviso. Indeed, the legislative history makes clear that Congress so intended § 16. In particular, stock, which is not subject to the proviso, simply may not be purchased by commercial banks for their own accounts. See S.Rep. No. 77, 73d Cong., 1st Sess., 16 (1933); S.Rep. No. 1007, p. 17; H.R.Rep. No. 742, p. 18; 5 V. DiLorenzo, W. Schlichting, T. Rice, & J. Cooper, Banking Law § 96.02[2], p. 96-16 (1981).
The Court also treats the purchasing and underwriting prohibitions in the Act as if they were entirely separate. See ante at 468 U. S. 158 -159. That treatment is inconsistent with the statutory language. There is no escaping the fact that any "security" that the Act forbids a commercial bank to underwrite the Act also forbids the bank to purchase, unless it is an investment security. Although the purposes of the prohibitions are somewhat different, the link between the prohibitions, at least as far as this case is concerned, is indissoluble.