The Watters v. People of the State of Michigan case in 1918 revolved around a dispute over state and federal jurisdiction, specifically regarding banking regulations. The plaintiff was Judith E. Watters, acting as the Commissioner of Insurance for Michigan who argued that under state law, she had authority to regulate all mortgage lending within her jurisdiction including those by national banks' operating subsidiaries. On the other hand, defendant Wachovia Bank contended that its subsidiary was subject to oversight only by federal regulators based on National Bank Act provisions which preempted conflicting state laws. In a 5-3 decision favoring Wachovia bank (Justice Alito did not participate), it was ruled that states cannot enforce their banking laws on nationally chartered banks or their operating subsidiaries because they fall under exclusive federal regulation according to the National Bank Act.

The dissenting opinion in the Watters v. People of the State of Michigan case argued that states should retain their power to regulate businesses within their borders, including national banks' real estate lending activities. The dissenters believed that allowing federal law to preempt state regulation would undermine dual banking system principles and could lead to a dangerous concentration of power at the federal level. They also expressed concern about potential risks associated with unchecked expansion by national banks into areas traditionally regulated by states, such as real estate lending. In essence, they felt that this decision was an overreach on part of the Federal Government and it undermined States' rights.