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Matched Legal Cases: ['§ 16', '§ 21', '§ 21', '§ 21', '§ 21', '§ 77', '§ 78', '§ 79', '§ 77', '§ 77', '§ 771', '§ 21', '§ 708', '§ 93', '§ 303', '§ 378', '§ 21', '§ 24', '§ 16', '§ 24', '§ 16', '§ 16', '§ 21', '§ 16', '§ 16', '§ 21', '§ 21', '§ 16', '§ 21', '§ 21', '§ 3', '§ 21', '§ 21', '§ 21', '§ 21', '§ 21', '§ 20', '§ 377', '§ 21', '§ 21', '§ 16', '§ 16', '§ 16', 'art 2', '§ 16', '§ 16', '§ 16', '§ 16', '§ 16', '§ 21', '§ 16', '§ 21', '§ 16', '§ 21', '§ 16', '§ 21', '§ 16', '§ 5', '§ 16', '§ 16', '§ 16', '§ 2', '§ 77', '§ 16', '§ 24', '§ 16', '§ 16', '§ 16', '§ 21', '§ 16', '§ 21', '§ 21', '§ 248', '§ 1818']

Securities Indus. Assn. v. FRS (full text) :: 468 U.S. 137 (1984) :: Justia U.S. Supreme Court Center Log In
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Securities Indus. Assn. v. FRS 468 U.S. 137 (1984)
U.S. Supreme CourtSecurities Indus. Assn. v. FRS, 468 U.S. 137 (1984)Securities Industry Association v. Board of Governorsof the Federal Reserve SystemNo. 82-1766Argued March 21, 1984Decided June 28, 1984468 U.S. 137CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
(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. Page 468 U. S. 138
224 U.S.App.D.C. 21, 693 F.2d 136, reversed and remanded. Page 468 U. S. 139
This case involves a challenge to the efforts of a state commercial bank to enter the business of selling third-party commercial paper. The Board of Governors of the Federal Reserve System (Board) concluded that such activity by state member banks is not prohibited by the Banking Act of 1933, ch. 89, 48 Stat. 162 (commonly known as the Glass-Steagall Act) because commercial paper is neither a "security" nor a "note" within the meaning of that Act, and therefore falls outside the Act's proscriptions. The District Court disagreed with the Board, but the Court of Appeals deferred to the Board's interpretation and reversed the judgment of the District Court. Because commercial paper falls within Page 468 U. S. 140 the plain language of the Act, and because the inclusion of commercial paper within the terms of the Act is fully consistent with the Act's purposes, we conclude that commercial paper is a "security" under the Glass-Steagall Act, and we reverse the judgment of the Court of Appeals.
On September 26, 1980, the Board responded to petitioners' request for enforcement of §§ 16 and 21 against Bankers Trust. See Federal Reserve System, Statement Regarding Petitions to Initiate Enforcement Action (1980), App. 122A (Board Statement). The Board acknowledged that Congress enacted the Act to prevent commercial banks from engaging Page 468 U. S. 141 in certain investment banking activities, but explained that Congress did not intend the Act's prohibitions to cover every instrument that could be characterized as a "note" or "security." The Board expressed concern that such a broad interpretation might preclude commercial banks from maintaining many of their traditional activities. Accordingly, the Board took the position that
The United States Court of Appeals for the District of Columbia Circuit, by a divided vote, reversed the judgment of the District Court. A. G. Becker Inc. v. Board of Governors Page 468 U. S. 142 of Federal Reserve System, 224 U.S.App.D.C. 21, 693 F.2d 136 (1982). The Court of Appeals' majority acknowledged that § 21's reference to "notes" was broad enough to include commercial paper, which is a promissory note. The court explained, however, that the term "note" was also susceptible of a narrower reading, limited to long-term debt securities closely resembling a bond or debenture, but of shorter maturity. Id. at 28-29, 693 F.2d at 143-144. Because the legislative history of the Act indicates that the 1933 Congress sought to encourage commercial banks to invest more heavily in commercial paper than in longer-term, more speculative securities, the court concluded that Congress used the term "notes" in § 21 in this narrower sense. Id. at 29-31, 693 F.2d at 144-146. Finally, the court endorsed the Board's functional analysis of commercial paper, and concluded that commercial paper more closely resembled a loan than a security because of its low default rate, the large denominations in which it is issued, and the sophistication of its buyers. In the Court of Appeals' view, these features of commercial paper eliminate the concerns that moved Congress to pass the Glass-Steagall Act. Id. at 32-36, 693 F.2d at 147-151.
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 Page 468 U. S. 143 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
"It is the administrative official, and not appellate counsel, who possesses Page 468 U. S. 144 the expertise that can enlighten and rationalize the search for the meaning and intent of Congress."
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 Page 468 U. S. 145 that commercial bank involvement in securities had made "one of the greatest contributions to the unprecedented disaster which has caused this almost incurable depression." 75 Cong.Rec. 9887 (1932).
The Act's legislative history is replete with references to the various conflicts of interest that Congress feared to be present when a single institution is involved in both investment and commercial banking. Congress observed that Page 468 U. S. 146 commercial bankers serve as an important source of financial advice for their clients. They routinely advise clients on a variety of financial matters such as whether and how best to issue equity or debt securities. Congress concluded that it was unrealistic to expect a banker to give impartial advice about such matters if he stands to realize a profit from the underwriting or distribution of securities. See, e.g., 75 Cong.Rec. 9912 (1932) (remarks of Sen. Bulkley). Some legislators noted that this conflict is exacerbated by the considerable fixed cost that a securities dealer must incur to build and maintain a securities distribution system. Explaining this concern, Senator Bulkley, a major sponsor of the Act, described the pressures that commercial banks had experienced through their involvement in the distribution of securities:
Congress also expressed concern that the involvement of a commercial bank in particular securities could compromise the objectivity of the bank's lending operations. Congress feared that the pressure to dispose of an issue of securities successfully might lead a bank to use its credit facilities to shore up a company whose securities the bank sought to distribute. See 1931 Hearings, pt. 7, p. 1064. Some in Page 468 U. S. 147 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.
75 Cong.Rec. 9912 (1932) (remarks of Sen. Bulkley). Through flat prohibitions, the Act sought to "separat[e] as completely as possible commercial from investment banking." Board of Governors of Federal Reserve System v. Page 468 U. S. 148 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.
Section 21 also separates investment and commercial banks, but does so from the perspective of investment banks. Congress designed § 21 to prevent persons engaged in specified investment banking activities from entering the commercial banking business. The section prohibits any person "engaged in the business of issuing, underwriting, selling, or distributing . . . stocks, bonds, debentures, notes, or other securities" from receiving deposits. Bankers Trust receives Page 468 U. S. 149 deposits, and it therefore is clear that § 21's prohibitions apply to it.
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 Page 468 U. S. 150 intended a narrower definition. Because the term appears in a phrase that includes "stocks, bonds, [and] debentures," the Board insists that the Act's prohibitions apply only to "notes [and] other securities" that resemble the enumerated financial instruments. The Board's position seems to be that, because "stocks, bonds, [and] debentures" normally are considered "investments," the Act is meant to prohibit the underwriting of only those notes that "shar[e] that characteristic of an investment that is the common feature of each of the other enumerated instruments." Brief for Respondents 23. Applying that criterion to commercial paper, the Board maintains that commercial paper more closely resembles a commercial loan, and that it is therefore not an investment of the kind that qualifies as a "security" under the Act.
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, Page 468 U. S. 151 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 Page 468 U. S. 152 similar concern over the ordinary meaning of the broad phrase "notes . . . or other securities" in § 21.
The Board, in contrast, seems to have concluded that a note is covered by the Act only if the note is properly viewed as an "investment." The Board contends that this approach requires it to consider a "cluster" of the note's features, see Brief for Respondents 34, n. 60, such as its maturity period, its risk features, and its prospective purchasers. Stocks, bonds, and debentures display a wide range of each of these characteristics, however, and the Act's underwriting prohibition does not demonstrate any sensitivity to the characteristics of a particular issue; the Act simply prohibits commercial Page 468 U. S. 153 banks from underwriting them all. Without some clearer directive from Congress that it intended the statutory terms to involve the nebulous inquiry described by the Board, we cannot endorse the Board's departure from the literal meaning of the Act. The Court, in another context, has said pertinently:
Although the guidelines may be a sufficient regulatory response to the potential problems, Congress rejected a regulatory approach when it drafted the statute, and it has adhered to that rejection ever since. In 1935, for example, Congress refused to amend the Act to permit "national banks under regulations by the Comptroller of the Currency . . . to underwrite and sell bonds, debentures, and notes." H.R.Conf.Rep. No. 1822, 74th Cong., 1st Sess., 53 (1935). As recently Page 468 U. S. 154 as 1980, Congress extended to the Comptroller of the Currency authority to issue such rules as were needed to "carry out the responsibilities of the office," but expressly continued to withhold from the Comptroller the authority to issue regulations concerning "securities activities of National Banks under the Act commonly known as the Glass-Steagall Act.'" Depository Institutions Deregulation and Monetary Control Act of 1980, § 708, 94 Stat. 188, 12 U.S.C. § 93a. When Congress has concluded that a particular form of notes should not be covered by the Act's prohibitions, it has amended the statute accordingly. See Banking Act of 1935, § 303(a), 49 Stat. 707, 12 U.S.C. § 378(a)(1) (exempting mortgage notes from the coverage of § 21). In the face of Congress' refusal to give the Board any rulemaking authority over the activities prohibited by the Act, we find it difficult to imagine that Congress intended the Board to engage in the subtle and ad hoc "functional analysis" described by the Board.
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: Page 468 U. S. 155
The 1933 Congress also was concerned that banks might use their relationships with depositors to facilitate the distribution of securities in which the bank has an interest, and Page 468 U. S. 156 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.
In addressing these concerns before this Court, the Board focuses primarily on the extremely low rate of default on prime-quality commercial paper. We do not doubt that the risk of default with commercial paper is relatively low -- lower perhaps than with many bank loans. For several reasons, however, we find reliance on this characteristic misplaced. First, it is not clear that the Board's exemption of commercial paper from the proscriptions of the Act is limited to commercial Page 468 U. S. 157 paper that is "prime." The statutory language admits of no distinction in this respect, and the logic of the Board's opinion must exempt all commercial paper from the prohibition on underwriting by commercial banks. Second, as described above, it appears that a bank can make a particular issue "prime" simply by extending backup credit to the issuer. Such a practice would seem to fit squarely within Congress' concern that banks would use their credit facilities to aid in the distribution of securities.
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.). Page 468 U. S. 158
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, Page 468 U. S. 159 A Conduct-Oriented Approach to the Glass-Steagall Act, 91 Yale L.J. 102 (1981); Comment, 9 J.Corp.L. 321 (1984).
Finally, it is certainly not without some significance that Bankers Trust's commercial paper placement activities appear Page 468 U. S. 160 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.
The question in this case is whether the Board of Governors of the Federal Reserve System (Board) adopted an erroneous interpretation of law when it concluded that Page 468 U. S. 161 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).
Analysis of this case requires simply an examination of the usual sources of statutory interpretation -- primarily the statutory language -- to determine whether the Board's reading is a reasonable one, even if it is not the only reasonable one. The Court of Appeals departed from this approach when it limited its approval of the Board's position to certain kinds of sales of certain kinds of commercial paper that it thought did not present certain dangers addressed by the Glass-Steagall Act, A. G. Becker Inc. v. Board of Governors of Federal Reserve System, 224 U.S.App.D.C. 21, 36-37, 693 F.2d 136, 151-152 (1982), and the Solicitor General, though not actually adopting a similarly limited position on behalf of the Board, has devoted a significant portion of his brief in this Court to elaborating the safety analysis underlying the Court of Appeals' limitation, Brief for Respondents 33-44. It is the Board's position, however, and not that of the Court of Page 468 U. S. 162 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 Page 468 U. S. 163 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."
Despite differences in language, moreover, §§ 16 and 21 are coextensive in their proscriptions of commercial banks' securities activities. The two provisions approach the same problem from different directions: broadly speaking, § 16 tells firms that engage in commercial banking that they cannot engage in certain securities activities; § 21 tells firms that engage in certain securities activities that they cannot engage in commercial banking. See Board of Governors of Federal Reserve System v. Investment Company Institute, Page 468 U. S. 164 450 U.S. at 450 U. S. 62-63. Moreover, § 21 itself contains a proviso intended
It is apparent from the statutory language that there is no "plain meaning" of the key terms in either § 16 or § 21 that forecloses the Board's interpretation. The Glass-Steagall Act nowhere defines the term "securities," and the term is not so well defined, either generally or as a legal term of art, that commercial paper is plainly included within its meaning. In particular, nothing on the face of the Glass-Steagall Act reveals whether "securities" refers to the class of all written instruments evidencing a financial interest in a business or, alternatively, to a narrower class of capital-raising investment instruments, as opposed to instruments evidencing short-term loans used to fund current expenses. The term "notes" in § 21, on which petitioners rest their argument that the Glass-Steagall Act covers commercial paper, is likewise susceptible to different meanings. Although "note" is often used generically to refer to any written promise to pay a specified sum on demand or at a specified time, see Uniform Page 468 U. S. 165 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
Section 21. Petitioners pin almost their entire statutory language argument on the contention that § 21 uses the term "notes" in its generic sense, as comprising all written promises to pay a specified sum on demand or at a specified time. Aside from the absence of any affirmative evidence favoring that interpretation, there are several reasons to think that petitioners' contention about the broad meaning of "notes" is Page 468 U. S. 166 erroneous. First, § 21's mention of bonds and debentures -- both of which are written promises to pay a specified sum on demand or on a specified date, see 1 Dewing, supra, at 169, 226 -- would be redundant if "notes" were as sweeping in its scope as petitioners suggest. Second, and more important, if § 21 included all written promises to pay a specified sum on demand or at a specified time, it would apply to such instruments as certificates of deposit, notes representing a bank loan to a business, bankers' acceptances, and loan participations. See Note, 91 Yale L.J. 102, 118-119, and nn. 126-129 (1981). Yet such a construction of "notes" would render unlawful much banking activity that not even petitioners urge is anything but legitimate commercial banking. For example, petitioners' reading of § 21 would make it
Finally, the language of § 21 provides affirmative support for the reasonableness of the Board's position that "notes" refers only to instruments characterizable as short-term bonds or debentures. In No. 83-614, Securities Industry Assn. v. Board of Governors of Federal Reserve System, post, Page 468 U. S. 167 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 Page 468 U. S. 168 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.
"marketable obligations, evidencing indebtedness of any person, copartnership, association, Page 468 U. S. 169 or corporation in the form of bonds, notes and/or debentures commonly known as investment securities under such further definition of the term . . . as may by regulation be prescribed by the Comptroller of the Currency."
History also supports the Board's conclusion that commercial paper is not an investment security. The phrase "investment security" originated in the McFadden Act of 1927, 44 Stat. (part 2) 1224, and the Glass-Steagall Act did not purport to alter the meaning of the phrase. The McFadden Act affirmed the authority of national banks to deal in "investment securities," subject to certain restrictions: it was intended to provide express statutory authorization for national banks' longstanding practice of dealing in corporate bonds. See H.R.Rep. No. 83, 69th Cong., 1st Sess., 3-4 (1926). Congressman McFadden, the sponsor of the Act, expressly stated during floor debate on the bill that commercial paper had not been and would not be regarded as an "investment security," and hence would be subject to the statutory limitations on loans, not to the restrictions of the McFadden Act. 67 Cong.Rec. 3232 (1926). This statement, which was not disputed by anyone in Congress, accurately reflects the fact that banks' involvement with commercial paper had long been understood as distinct from their involvement with investment instruments, since the purchase of commercial Page 468 U. S. 170 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,
Having established that commercial paper is not an "investment security," it is also possible to draw support for the Board's conclusion from the original 1933 language of § 16. As enacted in 1933, § 16 prohibited national banks from purchasing "investment securities" for their own account and Page 468 U. S. 171 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
Indeed, there is good reason to think that Congress understood the term "securities" to mean nothing broader than "investment securities." First, the 1935 amendment to § 16 substituted "securities and stock" for "investment securities" without suggesting that § 16's application to nonequity instruments was being in any way expanded. Similarly, the Page 468 U. S. 172 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.
This conclusion confirms the Board's view that §§ 16 and 21, as amended in 1935, were intended to apply only to investment instruments akin to stocks, bonds, and debentures. It also comports with what the legislative history reveals to have been of concern to the Congress that enacted Glass-Steagall. During the extensive legislative hearings and Page 468 U. S. 173 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. Page 468 U. S. 174
In determining the meaning of a term in a particular statute, the meaning of the term in other statutes is at best only one factor to consider, and it may turn out to be utterly irrelevant in particular cases. Congress need not, and frequently does not, use the same term to mean precisely the same thing in two different statutes, even when the statutes Page 468 U. S. 175 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]
In response to the demonstration that the language of §§ 16 and 21 simply cannot accommodate their view without outlawing concededly lawful commercial bank activities, petitioners argue that at least some of the activities at issue are authorized by other statutory language. Most important, Page 468 U. S. 176 petitioners observe, national commercial banks have been authorized to purchase commercial paper on their own accounts, under their authority to discount and negotiate promissory notes, since enactment of the National Bank Act in 1864, 13 Stat. 101, currently codified in 12 U.S.C. § 24 Seventh, immediately prior to § 16 of the Glass-Steagall Act. Thus, a national bank has the power
The existence of separate statutory authorizations for banking activity prohibited by petitioners' reading of the Glass-Steagall Act, however, only reinforces the Board's conclusion that "notes" and "securities" cannot have the broad meaning in §§ 16 and 21 that petitioners attribute to it. If any such statutory authorizations and the proscriptions of the Glass-Steagall Act are both to remain in force, only two conclusions are possible. Either the terms "notes" and "securities" must have a meaning narrower than the generic one or there is a conflict of statutes that cannot be resolved by any interpretation of the statutory language, so that one part of federal banking law must be read as implicitly repealing or overriding another. The latter alternative is a last resort, however, and must be avoided where an interpretation of the statutory language is available that is consistent with legislative intent and that shows the conflict to be merely apparent and not real. As shown above, the Board's reading of §§ 16 and 21 is such an interpretation. It makes sense of the language of federal banking law: for example, it construes "notes" in § 21, in accordance with the terms that surround it in the statute, as referring to investment instruments, and hence as not including commercial paper; at the same time, it Page 468 U. S. 177 construes "promissory notes" in the "discounting and negotiating" language of the National Bank Act, in accordance with the terms that surround it in the statute, as referring to commercial banking instruments, and hence as including commercial paper. Petitioners and the Court, by contrast, have not suggested any way out of the flat contradictions that their view of the Glass-Steagall Act creates in federal banking law. It was reasonable for the Board to conclude, App. to Pet. for Cert. 74a-75a, that the language of §§ 16 and 21 itself makes untenable the broad reading of "notes" and "securities" that petitioners suggest, and should be read in the narrow fashion set out in the Board's opinion.
In response to the Board's contention that the language of § 21 is reasonably construed to apply only to instruments with the characteristics of an investment, petitioners argue that Page 468 U. S. 178 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.
The Court decries the Board's approach as transforming the Glass-Steagall Act from the prohibitory statute that Congress enacted into a quite different statute delegating regulatory authority over the area to the Board. To be sure, the Board takes the position that the distinguishing characteristic of the instruments covered by the Glass-Steagall Act is whether the instruments represent investment transactions, rather than bank loan transactions. An investment instrument, according to the Board, may be distinguished by reference to a cluster of related characteristics not possessed by commercial paper -- for example, the absence of a short maturity, the existence of a substantial secondary market for them, their bearing of "market" risk in addition to "credit" risk, the issuer's freedom to use the proceeds for fixed capital purposes, their common availability to purchasers in small denominations, and their commonly being bought by a large number of purchasers. Page 468 U. S. 179
Finally, contrary to petitioners' allegation, the Board's functional analysis does not vest the Board with a substantial Page 468 U. S. 180 amount of regulatory discretion. In particular, it does not permit the Board to make case-by-case judgments about the Glass-Steagall Act's application to a particular instrument based on the instrument's safety and on whether it presents the dangers addressed by the Act. Indeed, the Board specifically declined to conduct a policy analysis of whether certain commercial paper activities presented the dangers at which the Act was aimed. See App. to Pet. for Cert. 83a. The Board, unlike the Court of Appeals, concluded that the Glass-Steagall Act is inapplicable to all commercial paper, not just to the particular kinds of commercial paper sold by Bankers Trust, ibid. The Board's conclusion about the meaning of the Glass-Steagall Act was simply a construction of the statute; it was only under distinct statutory authority to restrain unsafe or unsound banking practices, 38 Stat. 259, 261, as amended, 12 U.S.C. §§ 248 and 321; 64 Stat. 879, as amended, 12 U.S.C. § 1818(b), that the Board issued its guidelines specifying the kinds of commercial paper sales by commercial banks that it would permit.
The Board employed its functional analysis as one small part of its inquiry into the best construction of the statute. The Board did not purport in its ruling to lay down rules for determining what other instruments have the characteristics of an investment instrument so as to constitute a "security" under the Glass-Steagall Act. It simply reasoned that the language and history of the Act demonstrated that the Act does not cover commercial paper. Critical to the Board's conclusion is the fact that federal banking law treats commercial paper in such a way as to give rise to a flat contradiction if the Glass-Steagall Act were interpreted to embrace it. Because of its characteristics, commercial paper has long been treated, by federal law and by bankers, not as an investment instrument but as an instrument that commercial banks may purchase without regard to the proscriptions of the Glass-Steagall Act. Thus, the Board's placing of commercial paper in the commercial, rather than investment banking, Page 468 U. S. 181 world is firmly rooted in the statutory language and in a longstanding practice whose lawfulness is not even subject to dispute. Nothing in the Board's ruling extends to any instrument not already widely and lawfully purchased by commercial banks, and petitioners have not identified any class of financial instruments other than commercial paper that would come within the Board's reasoning in this case. The Board's ruling, in other words, is a narrow one with few implications for other applications of the Glass-Steagall Act.
In this case, the statutory language strongly supports the construction adopted by the Board, and it cannot bear the only construction proposed by petitioners and adopted by the Court. The Board's construction is also wholly consistent with the legislative history. It is singularly inappropriate for this Court, reasoning from the general policies it finds in the statute and with little regard for the statutory language, to reject the construction of the statute adopted by the Board after careful consideration and with full explanation. It is the Board, and not this Court, that has both responsibility for the oversight of much of our Nation's banking system and expertise and experience in applying the arcane body of law Page 468 U. S. 182 that governs it. When the statutory support for the Board's position is as strong as it is in this case, the Court's rejection of the agency's position is unjustified.