Term: 2006
Docket: 05-1342
Linda A. Watters, Commissioner, Michigan Office Of Insurance And Financial Services v. Wachovia Bank, N. A., Et Al.
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05-1342 WATTERS V. WACHOVIA BANK DECISION BELOW:431 F3d 556 JUSTICE THOMAS TOOK NO PART. CERT. GRANTED 6/19/2006 QUESTIONS PRESENTED: 1. 12 USC § 484(a) of the National Bank Act limits visitorial powers over "national banks" except as authorized by federal law . National banks are defined and created under the National Bank Act. State-chartered nonbank operating subsidiaries of national banks are created under State corporate law. The Comptroller of the Currency, by Rule 12 CFR 7.4006, made 12 USC § 484(a) equally applicable to State-chartered nonbank "operating subsidiaries" of national banks. Is the interpretation of the Comptroller of the Currency that 12 CFR 7.4006 preempts Michigan's laws regulating mortgage lending as applied to State chartered nonbank operating subsidiaries, entitled to judicial deference under Chevron USA, Inc v Natural Resources Defense Council, 467 US 837 (1984)? 2. A national bank has been declared to be a national corporation in Guthrie v Harkness, 199 US 148, 159 (1905). 12 CFR 7.4006 treats a State-chartered nonbank operating subsidiary of a national bank as equivalent to a national bank and, thus, as a national corporation. The Tenth Amendment to the United States Constitution is violated to the extent a statute permits the conversion of State corporations into federal ones in contravention of the laws of the place of their creation. Hopkins v Federal Savings & Loan Ass'n v Cleary, 296 US 315, 335 (1935). Does 12 CFR 7.4006, by equating a State-chartered nonbank operating subsidiary with a national bank for purposes of federal preemption of State regulation, violate the Tenth Amendment to the United States Constitution? LOWER COURT CASE NUMBER: 04-2257
The U.S. Supreme Court case Linda A. Watters, Commissioner, Michigan Office of Insurance and Financial Services v. Wachovia Bank, N.A., et al., 2006 revolved around the issue of whether state banking regulations could apply to national banks' operating subsidiaries or if they were exclusively subject to federal regulation under the National Bank Act (NBA). The dispute began when Linda A. Watters, in her capacity as a Michigan regulator, attempted to enforce state lending laws on Wachovia's mortgage business subsidiary which was registered as an operating subsidiary with the Office of Comptroller of Currency (OCC), a federal agency overseeing national banks. In response, Wachovia sued arguing that it was only subject to OCC oversight per NBA provisions and not any state regulations. In its decision delivered by Justice Ruth Bader Ginsburg for a unanimous court except Justice John Paul Stevens who did not participate in this case; the Supreme Court sided with Wachovia ruling that federally chartered bank subsidiaries are solely regulated by federal law under NBA and thus exempt from individual states’ banking regulations.
In the dissenting opinion for Watters v. Wachovia Bank, Justice Stevens argued that the majority's decision to exempt national banks' operating subsidiaries from state regulation was a significant and unwarranted expansion of federal power at the expense of states' rights. He contended that there is no clear evidence in either legislative history or statutory text indicating Congress intended such an exemption when it enacted laws governing national banking. Furthermore, he pointed out that this ruling could potentially lead to a situation where every business affiliated with a national bank would be immune from state oversight, which could have serious implications for consumer protection efforts by individual states. In essence, Justice Stevens believed that this case represented an overreach by federal authorities into areas traditionally regulated by states without explicit authorization from Congress.
