Court Opinion

ID: 9468183
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:07:29.108767+00
Date Added: 2024-06-11T17:40:44.444647
License: Public Domain

HEANEY, Circuit Judge,
with whom
BRIGHT and McMILLIAN, Circuit Judges, join, dissenting.
I respectfully dissent. The majority opinion follows the Ninth and the Fifth Circuit Courts of Appeals in holding that the Federal Reserve Board cannot deny an acquisition of a bank by a bank holding company for adverse competitive reasons unless such rise to the level of a violation of the Sherman or Clayton Acts. In so doing, the majority rejects the plain language of the Amendment, ignores the legislative history and intent, disregards administrative regulations and rulings and inhibits competition in the banking industry at a time when it is obviously needed. In my view, the decision of the Federal Reserve Board should be affirmed.
I
The language of the statute belies the majority’s reasoning. The last sentence in *1261section 3(c) requires that “[i]n every case the Board shall take into consideration the financial and managerial resources and future prospects of the [applicant] and the banks concerned, and the convenience and needs of the community to be served.” 12 U.S.C. § 1842(c) (1976) (emphasis added).
The phrase “convenience and needs” has historically been construed by this Court and the Board to include consideration of anticompetitive effects. See, e. g., Northwest Bancorporation v. Board of Gov’s of the Fed. Res. Sys., 303 F.2d 832, 839-842 (8th Cir. 1962); United Banks of Colo., Inc., 61 Fed.Res.Bull. 315 (1975); First Bank Stock Corp., 46 Fed.Res.Bull. 486 (1960). The use of the phrase in the last sentence of section 3(c) preserves the mandate of its predecessor section that the Board consider all competitive impacts of a proposed acquisition. In so doing, it recodifies the ultimate test imposed by the statute — the public interest standard. See United States v. Third Nat’l Bank in Nashville, 390 U.S. 171, 88 S.Ct. 882, 19 L.Ed.2d 1015 (1968).
A recent scholarly Law Review Note put the matter well:
Although the convenience and needs criterion appears in both section [3(c)(2)] and the unlettered sentence, it cannot be assumed that the intended application of the criterion in each provision is identical. An anticompetitive element is no longer essential to the convenience and needs analysis in section [3(c)(2)] because that inquiry has already been made in determining whether the transaction violates either section 7 of the Clayton Act or section 1 of the Sherman Act. Thus, the convenience and needs analysis of section [3(c)(2)] is a balancing test that emphasizes procompetitive aspects of the proposed merger. The scope of the convenience and needs criterion in the unlettered sentence is not necessarily limited to procompetitive aspects * * *. The construction of the unlettered sentence does not appear to extract the anticompetitive element from the criterion. Instead of functioning merely as a repetition of the positive element in a balancing equation, convenience and needs in the unlettered sentence should be construed as an independent standard that the banking agencies must consider in approving or disapproving proposed mergers. Both positive and negative aspects of that criterion, therefore, are left to the discretionary judgment of the regulatory agencies.
Note, Washington Mutual: A Judicial Amendment to the Bank Merger Act of 1966, 42 Geo.Wash.L.Rev. 639, 653 (1974).
II
The purposes of the 1966 Amendment were limited. The first “was to permit certain bank mergers even though they tended to lessen competition in the relevant market.” United States v. Third Nat’l Bank in Nashville, supra, 390 U.S. at 184, 88 S.Ct. at 890. The Amendment gave the Board the discretionary power to override the antitrust laws and approve a transaction that violates section 7 Clayton or section 1 Sherman. There is nothing in the legislative history of the Amendment to indicate that it was the intention of Congress to limit the discretion of the Board to consider anticompetitive effects under the convenience and needs standard of the unlettered sentence of section 3(c). See H.R. Rep.No.1221, 89th Cong.2d Sess. (1966), reprinted in [1966] U.S.Code Cong. & Ad. News 1860, 1862-1863. See also 112 Cong. Rec. 2443 (1966) (Remarks of Congressman Multer) (BMA).
The second purpose of the 1966 Amendment was to achieve uniformity of application by supervisory agencies and to prevent the federal courts from negating the public interest balancing test set out in the statute. Neither of these aims dictate that the Board evaluate the competitive impacts of an acquisition solely in conformity with antitrust standards.
Moreover, it appears that the Board, the FDIC and the Comptroller of the Currency were in substantial agreement concerning the scope of their discretionary authority at the time of the 1966 Amendment See First Bank Stock Corp., 46 Fed.Res.Bull. *1262486, 496 (1960); National Bank of Westchester, Decision of the Comptroller of the Currency (Dec. 19, 1961); Note, Washington Mutual: A Judicial Amendment to the Bank Merger Act of 1966, 42 Geo.Wash.L. Rev. 639, 649-651 (1974). The legislative history reflects this as well. H.R.Rep.No. 1221, 89th Cong., 2d Sess., reprinted in [1966] U.S.Code Cong. & Ad.News 1860, 1861.
Congress, noting that the banking agencies were in substantial agreement regarding the scope of their discretionary power, left this power untouched. In doing so, it recognized that an inflexible competitive standard is undesirable in a dual banking system. It knew that banks in the United States are chartered and overseen by both federal and state agencies. It understood that the anticompetitive impact of a proposed acquisition may differ markedly depending upon the state in which the transaction is proposed to occur. Since variations in state regulation produce appreciable differences in banking structures, Congress’s acquiescence to the agencies’ unified approach cements their authority to apply their standards in a way as to reflect such structural differences. See Note, Washington Mutual: A Judicial Amendment to the Bank Merger Act of 1966, 42 Geo.Wash.L.Rev. 639, 651 & nn. 86-88 (1974); cf. The McFadden Act of 1927, 12 U.S.C. § 36(c) (1976); Redford, Dual Banking: A Case Study in Federalism, 31 Law & Contemp: Prob. 749 (1966).
The majority’s conclusion that uniformity is synonymous with the standard that is easiest to apply is shortsighted and ignores the realities of the banking industry and the purposes of the 1966 Amendment. Banks can presently predict that the supervisory agencies will uniformily deny transactions that have “adverse” competitive impacts on communities as well as those that violate antitrust standards. In the end, the petitioners appear to want a standard that makes it easier to allow acquisitions, not necessarily one that is predictable.
Ill
The majority relies heavily upon Washington Mutual Savings Bank v. FDIC, 482 F.2d 459 (9th Cir. 1973). In my view, that case was wrongly decided.
In Washington Mutual, the court ruled that the FDIC could not deny a merger application on the basis of a competitive standard more stringent than the antitrust laws. That court construed section 5 of the BMA as curtailing the discretion of the FDIC. It reasoned that since Congress intended for the banking agencies to uniformly review all mergers and similar transactions, such agencies may not consider competitive factors other than the antitrust laws. Finally, the court reasoned that the statute was primarily designed to reduce competition in the banking industry.
As noted, the legislative history of the 1966 Amendment indicates that the Amendment was not designed to limit the Board’s discretionary authority to deny acquisitions found to be inimical to the public interest. Moreover, while it is clear that Congress intended to achieve uniformity in the agencies’ approach to evaluating mergers and acquisitions, there is nothing in logic, legislative history nor experience to suggest that adherence to antitrust standards alone is the only way to secure that result. Such a leap of faith is unwarranted. Finally, the Washington Mutual decision does not take account of Congress’s view that an effective banking system is necessarily keyed into reconciling the stability that results from proper regulation with the community benefits that result from competition. See United States v. Philadelphia Nat’l Bank, 374 U.S. 321, 372, 83 S.Ct. 1715, 1746, 10 L.Ed.2d 915 (1963); H.R.Rep.No. 1221, 89th Cong., 2d Sess., reprinted in [1966] U.S.Code Cong. & Ad.News 1860, 1861. Washington Mutual is grounded in the belief that the federal legislation that was passed in the 1930’s favoring the reduction of competition in the banking industry is the controlling congressional intention today. This ignores recent precedent and the clear intent of the *12631966 Amendment.1 See Board of Gov’s of the Fed. Res. Sys. v. First Lincolnwood Corp., 439 U.S. 234, 243-248 & nn. 11-12, 99 S.Ct. 505, 510-513 nn. 11-12, 58 L.Ed.2d 484 (1978); Mid-Nebraska Bancshares, Inc. v. Board of Gov’s of the Fed. Res. Sys., 627 F.2d 266, 269 (D.C.Cir.1980).
IV
The majority makes short shrift of the Supreme Court’s stated principle “that an agency’s longstanding construction of its statutory mandate is entitled to great respect, ‘especially when Congress has refused to alter the administrative construction.’ ” Board of Gov’s of the Fed. Res. Sys. v. First Lincolnwood Corp., supra, 439 U.S. at 248, 99 S.Ct. at 513 (quoting Red Lion Broadcasting Co. v. F.C.C., 395 U.S. 367, 381, 89 S.Ct. 1794, 1801, 23 L.Ed.2d 371 (1969)). The Board has long held that it has the authority to deny an acquisition that would have anticompetitive effects in an affected community, notwithstanding the absence of antitrust violations. See United Banks of Colo., Inc., 61 Fed.Res.Bull. 315 (1975); Security Fin. Serv., Inc., 56 Fed.Res.Bull. 834 (1970); First Wis. Bankshares Corp., 49 Fed.Res.Bull. 181 (1963); First Bank Stock Corp., 46 Fed.Res.Bull. 486 (1960). In 1969, the Board published its interpretive ruling that anticompetitive effects that fall short of antitrust violations will be considered as one of the relevant factors bearing on whether the Board will approve or deny a merger under the third step of the statutory test set out in the BMA. See 12 C.F.R. § 250.182(c) (1980). Although Congress has been made aware of the Board’s practice, in the several times since 1966 that it has “revisited the Act * * * [it has] left the practice untouched.” Board of Gov’s of the Fed. Res. Sys. v. First Lincolnwood Corp., supra, 439 U.S. at 248, 99 S.Ct. at 513 (quoting Saxbe v. Bustos, 419 U.S. 65, 74, 95 S.Ct. 272, 278-279, 42 L.Ed.2d 231 (1974)). It is entirely improper for this Court to legislate in an area intentionally left undisturbed by Congress.
V
Policy considerations warrant a decision contrary to the majority. In United States v. Philadelphia Nat’l Bank, supra, 374 U.S. 321, 83 S.Ct. 1715, the Supreme Court noted that competition in the banking industry is not per se undesirable, and that in order to foster the country’s fundamental national policy of competition, federal banking legislation should be construed to promote it, at least whenever such would not adversely affect the stability of our national banking structure or the availability of services from our nation’s banks. Id. at 372, 83 S.Ct. at 1746.
The 1966 Amendment was intended to protect the public interest by empowering the Board to overcome the inflexibility of the antitrust laws. The majority’s decision takes from the Board this flexibility. Moreover, it binds the hands of the Board and, thus, retards its continuing endeavor to foster the healthy competition that is a necessity to a responsible banking industry. See Note, Washington Mutual: A Judicial Amendment to the Bank Merger Act of 1966, 42 Geo.Wash.L.Rev. 639, 656-658 (1974); see generally Solomon, Bank Merger Policy and Problems: A Linkage Theory of Oligopoly, 89 Banking L.J. 116 (1972); Whitesell, Potential Competition and Bank Mergers, 88 Banking L.J. 387 (1971); Smith & Greenspun, Structural Limitation in Bank Competition, 32 Law & Contemp. Prob. 40 (1967); Kreps, Modernizing Banking Regulation, 31 Law & Contemp.Prob. 648 (1966).
It was necessary for Congress to empower the Board to approve acquisitions found to be violative of Clayton 7 and Sherman 1 in order to protect the soundness of our country’s banking industry. The 1966 *1264Amendment is premised on the belief that the agencies have the expertise required to modify the “negative parameters” of the Clayton Act. It follows, therefore, that this same expertise should be used to evaluate the significance of anticompetitive effects which are not technical antitrust violations. Note, Washington Mutual: A Judicial Amendment to the Bank Merger Act of 1966, 42 Geo.Wash.L.Rev. 639, 658 (1974) (footnote omitted).2

. In Mercantile Texas Corp. v. Board of Governors of the Fed. Res. Sys., 638 F.2d 1255 (5th Cir. 1981), the Fifth Circuit concluded that section 3(c) does not permit the Board to disapprove an acquisition without finding a violation of the antitrust standards incorporated into the statute. Mercantile, however, essentially determined that Washington Mutual Savings Bank v. FDIC, 482 F.2d 459 (9th Cir. 1973), and our panel decision were dispositive of the issue. The Fifth Circuit opinion thus suffers the same infirmities as the latter two decisions.

. Here, the Board has not determined whether a section 3(c)(2) violation would result from the proposed acquisition. If it had determined that no such violation would occur, then it would have characterized the anticompetitive effect using the term “adverse” standing alone. See 12 C.F.R. § 250.182(c) (1980). Here, however, the Board characterized the effect of the acquisition as “seriously adverse.” While it is not entirely clear what the Board means by this phrase, the word “seriously” certainly adds something to the term “adverse.” On remand, the Board may determine that the proposed acquisition fails the test of section 3(c)(2) and deny the petitioner’s application.