Opinion ID: 550162
Heading Depth: 2
Heading Rank: 1

Heading: The Bank Board's Interpretation Of CEBA In This Case Was Reasonable

Text: 32 In denying appellants' application to merge, the Bank Board interpreted section iii of the grandfather provision to require that the memorandum of understanding entered into relate to the specific transaction that will serve as the means by which the insured institution converts to FDIC insurance. Because the transaction contemplated in the Memorandum of Understanding that was filed on March 30, 1987 was between GW-California and GW-Utah, and the transaction that was the subject of the merger application through which GW-California would convert to FDIC (BIF) insurance is between GW-California and GW-Washington, the Board determined that GW-California did not qualify for grandfathered treatment. 33 This interpretation and application of CEBA is reasonable, if not mandated, by the language and legislative history of the statute. The express language of 12 U.S.C. Sec. 1441(f)(4)(F)(iii) provides that the exemption applies only where a memorandum of understanding had been executed pursuant to a transaction which will result in the termination of the institution's status as an insured institution (emphasis added). As the Bank Board points out, the plain meaning of that language is that the transaction contemplated in the memorandum of understanding must be the same transaction through which the institution departs from the FSLIC insurance system. The provision does not state that the memorandum of understanding may relate to a transaction that may result, or could result in exit from the FSLIC system, but rather that will result in the exit. 34 The legislative history of both CEBA and the subsequent one-year extension of the moratorium support this interpretation. Statements by the majority and minority managers of CEBA indicate that the provision was meant to apply to the particular transaction that will result in the departure from FSLIC. Senator Proxmire, Chairman of the Senate Banking Committee, stated that it was Congress' intent in the grandfather provisions 35 to except [from the CEBA moratorium] only those institutions that have, by March 31, 1987, formally executed letters of intent or written memorandums of understanding that indicate their present intent to proceed with the transaction that results in their leaving the FSLIC for the FDIC. 36 133 Cong.Rec. S11,210 (daily ed. August 4, 1987) (statement of Sen. Proxmire) (emphasis added). Similarly, Congressman Leach stated that the third category is intended to include those institutions that formally executed documents evidencing a decision to proceed with the transaction that results in their leaving the FSLIC.... 133 Cong.Rec. H6969 (daily ed. August 3, 1987) (statement of Rep. Leach) (emphasis added); see also 133 Cong.Rec. S11,210 (daily ed. August 4, 1987) (statement of Sen. Garn). 37 The legislative history of the CEBA moratorium renewal also makes clear that the grandfather provisions are to be narrowly construed so as not to frustrate the purpose of the moratorium--to prevent the exodus of healthy thrifts from the insurance fund. Senator Proxmire remarked that extension of the moratorium is critical, essential, to preserve the finances of the Federal Savings and Loan Insurance Corporation. Otherwise, the healthy savings and loans will leave the system.... 134 Cong.Rec. S7856 (daily ed. June 15, 1988) (statement of Sen. Proxmire). And Senator Riegle commented, I think that it is very important that we extend the moratorium so that solvent savings and loans not bail out of the S & L system and go over into the FDIC system. 134 Cong.Rec. S7858 (daily ed. June 15, 1988) (statement of Sen. Riegle). 38 Indeed, Congress so narrowed this grandfather provision that in the final conference report, H.R.Conf.Rep. No. 261, 100th Cong., 1st Sess. 158 (1987), U.S.Code Cong. & Admin.News 1987, pp. 489, 627, it deleted from a preliminary report of the House Committee on Banking, Housing and Urban Affairs, dated July 24, 1987, a discussion that stated that any institution whose board of directors had adopted a resolution to leave the FSLIC system prior to the cutoff date was exempted from the moratorium. 39 Thus, the Bank Board's interpretation of the CEBA grandfather clause iii as not permitting an institution to merge with a different partner than the one contemplated in the memorandum of understanding, is not only reasonable, but is practically mandated by the statute's language and legislative history.