WWW.DISSERTATION.XLIBX.INFO
FREE ELECTRONIC LIBRARY - Dissertations, online materials
 
<< HOME
CONTACTS



Pages:   || 2 | 3 | 4 | 5 |   ...   | 12 |

«1995 1995 Wild Card Statutes, Parity, and National Banks - The Renascence of State Banking Powers Christian A. Johnson Assist.Prof., Loyola ...»

-- [ Page 1 ] --

Loyola University Chicago Law Journal

Volume 26

Article 2

Issue 3 Spring 1995

1995

Wild Card Statutes, Parity, and National Banks -

The Renascence of State Banking Powers

Christian A. Johnson

Assist.Prof., Loyola University Chicago, School of Law

Follow this and additional works at: http://lawecommons.luc.edu/luclj

Part of the Banking and Finance Law Commons

Recommended Citation

Christian A. Johnson, Wild Card Statutes, Parity, and National Banks - The Renascence of State Banking Powers, 26 Loy. U. Chi. L. J. 351 (1995).

Available at: http://lawecommons.luc.edu/luclj/vol26/iss3/2 This Article is brought to you for free and open access by LAW eCommons. It has been accepted for inclusion in Loyola University Chicago Law Journal by an authorized administrator of LAW eCommons. For more information, please contact law-library@luc.edu.

Wild Card Statutes, Parity, and National Banks- The Renascence of State Banking Powers ChristianA. Johnson*

TABLE OF CONTENTS

352 I.INTRODUCTION

II.THE DUAL BANKING SYSTEM AND

354 BANKING POWERS

A. Generally

B. National Banking Powers

C. State Banking Powers

D. Other FederalRegulators

1. The Federal Reserve Board

2. The FDIC

III.PRESSURES TO EXPAND STATE BANKING

POW ERS

A. The Role of State Banks

B. Expanding National Banking Powers............ 363 C. PoliticalPressures

D. Legislative Inertia

E. Interstate Banking

IV.WILD CARD STATUTES

A.G enerally

B. Characteristics

C. Regulatory Interpretationof the Wild Card Statute.... 372

1. Investm ents

* Assistant Professor of Law, Loyola University Chicago School of Law; B.A., 1984, M.Pr.A., 1985, Utah; J.D., 1990, Columbia. The author gratefully acknowledges the thoughtful comments of Steven Huefner, Franklin Johnson, and Nancy Sanborn.

The author was an associate with Mayer, Brown & Platt during the preparation of this Article and wishes to thank the firm for its generous assistance. The author also thanks Richard Brennan, Richard Cummings, Edward Dobbins, Kevin Hallagan, Elizabeth Raymond, and Richard Rosenberg for comments made during earlier discussions regarding wild card statutes. The views expressed herein are solely those of the author.

352 Loyola University Chicago Law Journal [Vol. 26

–  –  –

I. INTRODUCTION Over the last 100 years, the United States has developed what is commonly referred to as a "dual banking system."' Under this system, a bank is chartered, examined, and regulated as either a national bank, under the National Bank Act,2 or as a state chartered bank under any one of fifty different state banking laws. 3

1. See generally Edward L. Symons, Jr., The United States Banking System, 19 BROOK. J. INT'L L. 1 (1993) (detailing the history of the United States banking industry). For a general history of commercial banking, see BENJAMIN J. KLEBANER, COMMERCIAL BANKING IN THE UNITED STATES: A HISTORY (1974); JAMES J. WHITE, 1-34 (1976); see also Melanie L. Fein, The

TEACHING MATERIALS ON BANKING LAW

FragmentedDepository Institutions System: A Case for Unification, 29 AM. U. L. REV.

633 (1980) (discussing regulation of depository institutions).

2. National Bank Act of 1864, ch. 106, 13 Stat. 99 (codified as amended in scattered sections of 12 U.S.C. (1988 & Supp. V. 1993)) (repealing the National Bank Act of 1863, ch. 58, 12 Stat. 665).

3. See Symons, supra note 1, at 9. Depository institutions can also be regulated The Renascence of State Banking Powers 19951 State chartered banks ("State Banks") have traditionally been an important part of the dual banking system, often leading the way in banking innovations.4 State banking regulators have also developed new approaches for regulating and examining financial institutions.5 Finally, State Banks provide state legislatures with a degree of control over their banking systems that the state legislatures do not have over national banking associations chartered by the federal government ("National Banks").6 During the last decade, however, State Banks have experienced difficulty in remaining competitive with National Banks. The primary impetus for this lack of competitiveness is the increasingly broad powers granted to National Banks by the Office of the Comptroller of the Currency (the "OCC"), which has allowed National Banks to engage in non-traditional banking activities such as financial derivatives and insurance brokerage.

An obvious solution for State Banks would be to increase their powers to correspond to those enjoyed by National Banks. State legislatures have attempted to speed up that process by passing "wild card" or "parity" statutes. A "wild card" or "parity" statute enables a state banking regulator to grant a State Bank the same banking powers enjoyed by a National Bank. These statutes provide an efficient, fast, and flexible tool for state banking regulators to expand state banking powers to match those granted to National Banks.7 A number of obstacles, however, have prevented state legislatures and banking

regulators from taking full advantage of wild card statutes, including:





(1) safety and soundness considerations; (2) bureaucratic inertia; and (3) limitations potentially imposed by state laws.

This Article proposes that judicious use of "wild card" statutes would provide state banking regulators with the powers necessary to enable their State Banks to compete on an equal footing with National Banks without endangering the institutions' safety and soundness.

under other federal regulations. See generally Fein, supra note I (discussing the regulation of banks, savings and loans, credit unions, and other depository institutions).

4. See infra part III.A.

5. See infra part III.A.

6. See infra part III.A.

7. State laws utilizing federal laws as a standard for state action are not unknown in other areas. The most prominent example is a state's "long arm" statute. See, e.g., CAL.

CIV. PROC. CODE § 410.10 (West 1973) (providing that a court "may exercise jurisdiction on any basis not inconsistent with the Constitution... of the United States"). Other examples include state securities "Blue Sky" laws and state income tax codes.

354 Loyola University Chicago Law Journal [Vol. 26 This Article initially discusses the dual banking system in the United States and the pressures to expand state banking powers.8 This Article then describes wild card statutes and their current use by state banking regulators, focusing on the more fruitful areas of wild card application. 9 It then scrutinizes some potential difficulties in their application, and proposes a model wild card statute.' ° Finally, this Article concludes that State Banks can remain competitive with National Banks."

To ensure this outcome, however, State Banks must urge their banking regulators to utilize the powers provided by their respective wild card statutes. Additionally, State Banks must encourage state legislatures to clarify the activities authorized thereunder.

H. THE DUAL BANKING SYSTEM AND BANKING POWERS

A. Generally The dual banking system in the United States is a complex historical outgrowth of state and federal regulations governing commercial banks.' 2 The result is a system in which two commercial banks can service the same customers, be the same size and be located in the same city, and yet be authorized to exercise different banking powers.

As of the end of 1993, approximately 11,300 commercial banks held approximately $3.9 trillion in assets and $3.0 trillion in deposits.' 3 Roughly 8,000 of these commercial banks were State Banks, holding $1.8 trillion of the assets and $1.4 trillion of the deposits. 4 The remaining 3,300 commercial banks were National Banks holding $2.1 trillion in assets and $1.6 trillion in deposits.' 5 The end result of the dual banking system is a non-uniform system in which commercial banks may enjoy different banking powers

8. See infra parts II and III.

9. See infra parts IV and V.

10. See infra parts VI and VII.

11. See infra part VIII.

12. Unless otherwise indicated, "commercial bank(s)" includes both commercial banks and savings banks, but excludes savings and loan institutions, investment banks, and other depository or nondepository institutions. A discussion of the effect of wild card statutes on these other non-bank financial institutions is beyond the scope of this Article.

13. See CONFERENCE OF STATE BANK SUPERVISORS, THE STATE OF THE STATE BANKING

SYSTEM 7-8 & figs. 1-3 (1994).

14. See id.

15. See id.

The Renascence of State Banking Powers 19951 6 depending upon whether they are state or federally chartered.' Compounding this complexity is the fact that both federal and state commercial banks are subject to a patchwork of laws and regulations.

B. NationalBanking Powers National Banks have existed in one form or another since the founding of the United States.' 8 National Banks did not become a fixture of the American banking system, however, until Congress provided for the chartering of National Banks under the National Bank Act of 1864.'9 Although subject to significant revision and amendment since that time, the National Bank Act continues to govern National Banks.20

16. See ROBERT E. LITAN, WHAT SHOULD BANKS Do? (1987); see also Kenneth E.

Scott, The Dual Banking System: A Model of Competition in Regulation, 30 STAN. L.

REV. 1, 20 (1977) ("[Ilt should be evident that the existence of 51 lawmaking bodies in addition to the federal government has created great diversity among the powers conferred on banks and the restrictions imposed on them.").

17. Commentators continue to lament the state of the United States' regulation of

financial institutions:

Nevertheless, we continue the vestigial debates about such parochial matters as the dual banking system, branching, interstate banking, and section 4(c)(8) bank holding company powers and restrictions. These and other topics still dominate the financial and depository scene here in the United States, bearing little or no relationship to the realities of the financial world at large.

Paul Nelson, Banking Regulation in the Nineties: Fighting Tomorrow's Battles with Yesterday's Tools, 9 ANN. REV. BANKING L. 369, 370 (1990) (footnote omitted).

18. See BRAY HAMMOND, BANKS AND POLITICS INAMERICA: FROM THE REVOLUTION TO

THE CIVIL WAR 720-25 (1957). The federal government chartered two National Banks between 1791 and 1816, although both charters were eventually repealed. See Symons, supra note 1, at 6-7. For a discussion of the history of the First and Second Bank of the United States, see HAMMOND, supra, and Symons, supra note 1, at 6-7. The nation's first bank was actually the Bank of North America, chartered by the Confederation Congress in 1781. See HAMMOND, supra, at 48-51. The Bank of North America subsequently obtained a state charter from Pennsylvania in 1782. Id.

19. National Bank Act of 1864, ch. 106, 13 Stat. 99 (codified as amended in scattered sections of 12 U.S.C. (1988 & Supp. V 1993)) (repealing the National Bank Act of 1863, ch. 58, 12 Stat. 665). Congress appears to have modeled the National Bank Act on various state bank chartering laws, particularly the New York Free Banking Act of

1838. See Edward L. Symons, Jr., The "Business of Banking" in Historical Perspective, 51 GEO. WASH. L. REV. 676, 689-90 (1983).

20. In certain matters, however, Congress and the courts have defaulted to state law.

See, e.g., 12 U.S.C. §§ 92a(f), (i) (1988) (mandating that trust department operations must not contravene state law); id. § 36(c) (branching); First Nat'l Bank v. Missouri, 263 U.S. 640, 656 (1924) (explaining that state law governs National Banks to the extent that it does not conflict with federal statutes, discriminate against National Banks, or unduly burden their operation).

Loyola University Chicago Law Journal 356 [Vol. 26 National Banks are regulated by the OCC, an office within the United States Treasury Department. 2' The OCC is specifically empowered to charter National Banks, 22 examine them, 23 and promulgate regulations governing them. 2 Courts have been reluctant to disturb 4 OCC decisions because of the broad delegation of authority granted to the OCC by Congress in the National Bank Act. 2 Section 24 of the National Bank Act enumerates the powers granted to National Banks to conduct a banking business, including the power to engage in activities incidental to the business of banking.26 A National Bank must obtain the express consent of the OCC before it may engage in activities not expressly provided for in either statute or regulation. Most of the growth in the powers of National Banks has been based upon the incidental banking power provided by the National Bank Act.28 Congress, in contrast, has expressly granted few

21. 12 U.S.C. §§ 21, 24 (Seventh) (1988 & Supp. V 1993), as amended by Riegle Community Development and Regulatory Improvement Act of 1994, Pub. L. No. 103Stat. 2160, 2226-27, 2241.

22. Id. § 27 (1988), as amended by Riegle Community Development and Regulatory Improvement Act of 1994, Pub. L. No. 103-325, 108 Stat. 2160, 2227.

23. Id. §§ 26, 481 (1988 & Supp. V 1993). The OCC is expressly precluded from examining state member banks, regardless of any affiliation with a National Bank. See id. § 481.

24. Id. § 93a (1988).

25. See Michael P. Malloy, Balancing Public Confidence and Confidentiality:

Adjudication Practices and Procedures of the Federal Bank Regulatory Agencies, 61 TEMP. L. REV. 723, 733-36, 771-77 (1988); see also First Nat'l Bank v. Smith, 610 F.2d 1258, 1264 (5th Cir. 1980) (recognizing the Comptroller's wide discretion);

Investment Co. Inst. v. Conover, 790 F.2d 925, 935 (D.C. Cir.) (recognizing that the OCC has primary responsibility for interpreting the statute), cert. denied, 479 U.S. 939 (1986).

26. Section 24 provides as follows:



Pages:   || 2 | 3 | 4 | 5 |   ...   | 12 |


Similar works:

«NORTHERN MIDLANDS COUNCIL AREA– COMMUNITY/HOUSEHOLD FOOD ACCESS PROFILE Introduction & disclaimer – This profile has been developed by the Heart Foundation Tasmania as part of the Healthy Food Access Tasmania Project. The information highlighted in this profile was gathered in 2014/15 and it provides an overview for the local government area. For any questions or additional information please contact the Heart Foundation. Why does access to healthy food matter? Limited or poor access to...»

«Hundredsofrealpersonalaccountsof GroupDiscussions&PersonalInterviews duringMBAadmissionstoIndia’sbestB schools Writtenby Compiledby LoadsofMBAAspirants ThePaGaLGuYMadCapzGroup PaGaLGuY.com Antholo gy Hundreds of real personal accounts of Group Discussions and Personal Interviews during MBA admissions to India’s best business schools. In this edition: The IIMs at Ahmedabad, Bangalore, Calcutta, Lucknow, Indore & Kozhikode. Written by Loads of MBA aspirants Compiled by...»

«University of Warwick institutional repository: http://go.warwick.ac.uk/wrap A Thesis Submitted for the Degree of PhD at the University of Warwick http://go.warwick.ac.uk/wrap/35765 This thesis is made available online and is protected by original copyright. Please scroll down to view the document itself. Please refer to the repository record for this item for information to help you to cite it. Our policy information is available from the repository home page.ThE DYNAMICS OF SW)P S1EWARD...»

«Java and the Internet of Things: Automating the Industrial Economy ORACLE WHITE PAPER | FEBRUARY 2015 Java and the Internet of Things: Automating the Industrial Economy 3 The Need for Integration in the Internet of Things 4 IoT in Industrial Automation 6 Increased Value: Java and Industrial Automation 9 Java Reference Architecture for Industrial Automation 14 Getting Started with Oracle 19 2 | JAVA AND THE INTERNET OF THINGS: AUTOMATING THE INDUSTRIAL ECONOMY Java and the Internet of Things:...»

«POLICY ANALYSIS Civil War in Yemen: A Complex Conflict with Multiple Futures Aleksandar Mitreski | Aug 2015 Civil war in Yemen: A Complex Conflict with Multiple Futures Series: Policy Analysis Aleksandar Mitreski | Aug 2015 Copyright © 2015 Arab Center for Research and Policy Studies. All Rights Reserved. The Arab Center for Research and Policy Studies is an independent research institute and think tank for the study of history and social sciences, with particular emphasis on the applied...»

«The Hidden Costs of Self-Signed SSL Certificates Why self-signed certificates are much costlier—and riskier—than working with a trusted security vendor Introduction Even when business is booming, smart companies always have an eye on the bottom line and look for ways to reduce costs. Security is not usually one of the first places companies look to trim expenses, but some IT professionals believe that they can easily lower cash outlays by eliminating third-party Secure Sockets Layer (SSL)...»

«WHEN IT COMES TO BUSINESS LEADERSHIP, NICE GUYS FINISH FIRST A Green Peak Partners Study Shows That Conventional Wisdom Is Wrong – and That Leaders Who Possess Strong Soft Skills Perform Better at Driving Hard Results By J.P. Flaum, Managing Partner, Green Peak Partners To the private equity investors who held key board seats in SkyRocket Software (hypothetical company), Steve seemed to be the perfect CEO candidate. Energetic, hard-driving, and with a strong track record in finance and...»

«How Should Suburbs Help Their Central Cities? Growth and Welfare Enhancing Intra-metropolitan Fiscal Distributions by Andrew F. Haughwout Federal Reserve Bank of New York Robert P. Inman University of Pennsylvania and National Bureau of Economic Research Abstract Cities are the location of the great majority of economic activity in the United States, and produce a disproportionate share of output. It is thus critical for the economy’s long term growth that cities operate efficiently. In this...»

«Copyright Notice The material contained in this article is protected by U.S. Copyright and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. 7 page(s) will be printed. Back Record: 3 Why family businesses are best.; By: Brokaw, L.; Murphy, A., Inc., Mar92, Vol. 14 Issue 3, p72, 7p, 4c, 1bw Database: Academic Search Premier WHY...»

«4 Introduction and Overview It wae the beet of tlmee, It wae the worst of times. Dickens, Tale of Two Cities, 1859 Today, many businesses, corporations, and institutions are striving to optimize their usage of computer resources. Rightsizing is the way to match available computer resources to individual or corporate needs. This chapter introduces the concepts, basic terminology, and major implementation strategies related to rightsizing.WHAT IS RIGHTSIZING? Rightsizing is a new term for...»

«SHOULD SUBURBS HELP THEIR CENTRAL CITY? by Andrew F. Haughwout* and Robert P. Inman** April, 2002 ABSTRACT Should suburbs help finance the core public services of their central city? Previous arguments for such assistance have stressed spillovers from city services to suburban residents or the fact that suburban residents (should?) care about their city’s poor. We explore the validity of a third possible argument for such assistance, one now stressed by many large city mayors. Suburban...»

«13 Vijay K. Bhatia* & Christopher N. Candlin* Analysing Arbitration Laws across Legal Systems Abstract In this paper, the national Indian and Chinese statutes on arbitration are compared with the UNCITRAL Model Law. After a presentation of the GILD-MMC project, focus is especially on textual aspects indicating attitudes towards the relation between the administrative powers and the parties in commercial arbitration. Thus, looking at the features all-inclusiveness, information load, information...»





 
<<  HOME   |    CONTACTS
2016 www.dissertation.xlibx.info - Dissertations, online materials

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.