Source: http://www.law.cornell.edu/supct/html/05-1342.ZS.html
Timestamp: 2014-03-12 03:57:33
Document Index: 7251177

Matched Legal Cases: ['§1', '§24', '§484', '§7', '§371', '§24', '§24', '§5', '§24', '§484', '§371', '§484', '§24', '§5', '§5', '§24', '§484', '§484', '§481', '§481', '§481', '§221', '§24', '§1843', '§7']

WATTERS, COMMISSIONER, MICHIGAN OFFICEOF INSURANCE AND FINANCIAL SERVICES
National banks’ business activities are controlled by the National Bank Act (NBA), 12 U. S. C. §1 et seq., and regulations promulgated thereunder by the Office of the Comptroller of the Currency (OCC), see §§24, 93a, 371(a). OCC is charged with supervision of the NBA and, thus, oversees the banks’ operations and interactions with customers. See NationsBank of N. C., N. A. v. Variable Annuity Life Ins. Co., 513 U. S. 251
. The NBA grants OCC, as part of its supervisory authority, visitorial powers to audit the banks’ books and records, largely to the exclusion of other state or federal entities. See §484(a); 12 CFR §7.4000. The NBA specifically authorizes federally chartered banks to engage in real estate lending, 12 U. S. C. §371, and “[t]o exercise … such incidental powers as shall be necessary to carry on the business of banking,” §24 Seventh. Among incidental powers, national banks may conduct certain activities through “operating subsidiaries,” discrete entities authorized to engage solely in activities the bank itself could undertake, and subject to the same terms and conditions as the bank. See §24a(g)(3)(A); 12 CFR §5.34(e).
(a) The NBA vests in nationally chartered banks enumerated powers and all “necessary” incidental powers. 12 U. S. C. §24 Seventh. To prevent inconsistent or intrusive state regulation, the NBA provides that “[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law … .” §484(a). Federally chartered banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or purposes of the NBA. But when state prescriptions significantly impair the exercise of authority, enumerated or incidental under the NBA, the State’s regulations must give way. E.g., Barnett Bank of Marion Cty., N. A. v. Nelson, 517 U. S. 25
. The NBA expressly authorizes national banks to engage in mortgage lending, subject to OCC regulation, §371(a). State law may not significantly burden a bank’s exercise of that power, see, e.g., Barnett Bank, 517 U. S., at 33–34. In particular, real estate lending, when conducted by a national bank, is immune from state visitorial control: The NBA specifically vests exclusive authority to examine and inspect in OCC. 12 U. S. C. §484(a). The Michigan provisions at issue exempt national banks themselves from coverage. This is not simply a matter of the Michigan Legislature’s grace. For, as the parties recognize, the NBA would spare a national bank from state controls of the kind here involved. Pp. 5–10.
(b) Since 1966, OCC has recognized national banks’ “incidental” authority under §24 Seventh to do business through operating subsidiaries. See 12 CFR §5.34(e)(1). That authority is uncontested by Michigan’s Commissioner. OCC licenses and oversees national bank operating subsidiaries just as it does national banks. See, e.g., §5.34(e)(3); 12 U. S. C. §24a(g)(3)(A). Just as duplicative state examination, supervision, and regulation would significantly burden national banks’ mortgage lending, so too those state controls would interfere with that same activity when engaged in by a national bank’s operating subsidiary. This Court has never held that the NBA’s preemptive reach extends only to a national bank itself; instead, the Court has focused on the exercise of a national bank’s powers, not on its corporate structure, in analyzing whether state law hampers the federally permitted activities of a national bank. See, e.g., Barnett Bank, 517 U. S., at 32.And the Court has treated operating subsidiaries as equivalent to national banks with respect to powers exercised under federal law (except where federal law provides otherwise). See, e.g., NationsBank, 513 U. S., at 256–251. Security against significant interference by state regulators is a characteristic condition of “the business of banking” conducted by national banks, and mortgage lending is one aspect of that business. See, e.g., 12 U. S. C. §484(a). That security should adhere whether the business is conducted by the bank itself or by an OCC-licensed operating subsidiary whose authority to carry on the business coincides completely with the bank’s. Watters contends that if Congress meant to deny States visitorial powers over operating subsidiaries, it would have written §484(a)’s ban on state inspection to apply not only to national banks but also to their affiliates. She points out that §481, which authorizes OCC to examine “affiliates” of national banks, does not speak to state visitorial powers. This argument fails for two reasons. First, any intention regarding operating subsidiaries cannot be ascribed to the 1864 Congress that enacted §§481 and 484, or the 1933 Congress that added the affiliate examination provisions to §481 and the “affiliate” definition to §221a, because operating subsidiaries were not authorized until 1966. Second, Watters ignores the distinctions Congress recognized among “affiliates.” Unlike affiliates that may engage in functions not authorized by the NBA, an operating subsidiary is tightly tied to its parent by the specification that it may engage only in “the business of banking,” §24a(g)(3)(A). Notably, when Congress amended the NBA to provide that operating subsidiaries may “engag[e] solely in activities that national banks are permitted to engage in directly,” ibid., it did so in an Act providing that other affiliates, authorized to engage in nonbanking financial activities, e.g.,securities and insurance, are subject to state regulation in connection with those activities. See, e.g., §§1843(k), 1844(c)(4). Pp. 10–15.
2. Watters’ alternative argument, that 12 CFR §7.4006 violates the Tenth Amendment , is unavailing. The Amendment expressly disclaims any reservation to the States of a power delegated to Congress in the Constitution, New York v. United States, 505 U. S. 144
. Because regulation of national bank operations is Congress’ prerogative under the Commerce and Necessary and Proper Clauses, see Citizens Bank v. Alafabco, Inc., 539 U. S. 52
, the Amendment is not implicated here. P. 17.