Petition for Rulemaking to Preempt Certain State Laws, 13413-13425 [05-5499]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 70, Number 53 (Monday, March 21, 2005)]
[Proposed Rules]
[Pages 13413-13425]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-5499]


=======================================================================
-----------------------------------------------------------------------

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Chapter III


Petition for Rulemaking to Preempt Certain State Laws

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of public hearing.

-----------------------------------------------------------------------

SUMMARY: This document announces a public hearing on a petition for 
rulemaking (``Petition'') that would preempt certain state laws. 
Generally, the Petition asks the FDIC to issue a rule that preempts the 
application of certain state laws to the interstate operations and 
activities of state banks. The stated purpose of the requested 
rulemaking is to establish parity between state-chartered banks and 
national banks in interstate activities and operations. A copy of the 
Petition is attached to this document. The FDIC has scheduled a hearing 
to obtain the public's views on the issues presented by the Petition. 
This document sets forth the date, time, location, and other details of 
the hearing; it also summarizes the Petition and highlights several 
issues that participants in the hearing may wish to address. 
Opportunities to make an oral presentation at the hearing are limited, 
and not all requests may be granted. Attendance at the hearing is not 
required in order to submit a written statement.

DATES: The hearing will be held on Tuesday, May 24, 2005, from 8:30 
a.m. to 5 p.m. Anyone wishing to make an oral presentation at the 
hearing must (i) deliver a written request to the Executive Secretary 
of the FDIC, no later than 5 p.m. on Monday, May 9, 2005; and (ii) 
deliver a copy of his or her written statement plus a two-page (or 
less) summary of the statement to the Executive Secretary no later than 
5 p.m. on Monday, May 16, 2005. All limited-appearance statements 
submitted in lieu of an oral presentation must be received by the 
Executive Secretary no later than 5 p.m. on Monday, May 16, 2005.

ADDRESSES: The hearing will be held in the Board room at the FDIC's 
headquarters, 550 17th Street, NW., Washington, DC.
    You may submit a written request to make an oral presentation at 
the hearing, a copy of the written statement you will present, and the 
two-page (or less) summary, or a limited-appearance statement by any of 
the following methods:
     Agency Web site: https://www.FDIC.gov/regulations/laws/
federal/propose.html. Click on Submit Comment.
     E-mail: comments@FDIC.gov.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Room 3060, Federal Deposit Insurance Corporation, 
550 17th Street, NW., Washington, DC 20429.
     Hand Delivered/Courier: The guard station at the rear of 
the 550 17th Street Building (located on F Street), on business days 
between 7 a.m. and 5 p.m.
     Public Inspection: All statements and summaries may be 
inspected and photocopied in the FDIC Public Information Center, Room 
100, 801 17th Street, NW., Washington, DC, between 9 a.m. and 4:30 p.m. 
on business days.
     Internet Posting: Statements and summaries received will 
be posted without change to https://www.FDIC.gov/regulations/laws/
federal/propose.html, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: For questions regarding the conduct of 
the hearing: contact Valerie Best, Assistant Executive Secretary, (202) 
898-3812; for questions regarding substantive issues: contact Robert C. 
Fick, Counsel, (202) 898-8962; or Joseph A. DiNuzzo, Counsel, (202) 
898-7349, Legal Division, Federal Deposit Insurance Corporation, 
Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

[[Page 13414]]

I. Overview of the Rulemaking Petition

    The Financial Services Roundtable, a trade association for 
integrated financial services companies (``Petitioner''), submitted the 
Petition to the FDIC. The Petition asks that the FDIC adopt rules 
concerning the interstate activities of insured state banks and their 
subsidiaries that are intended to provide parity between state banks 
and national banks. Generally, the requested rules would provide that a 
state bank's home state law governs the interstate activities of state 
banks and their subsidiaries to the same extent that the National Bank 
Act (``NBA'') governs a national bank's interstate activities. A copy 
of the entire Petition is appended to this notice. The Petitioner 
requests that the FDIC adopt rules with respect to the following areas:
     The law applicable to activities conducted in a host state 
by a state bank that has an interstate branch in that state,
     The law applicable to activities conducted by a state bank 
in a state in which the state bank does not have a branch,
     The law applicable to activities conducted by an operating 
subsidiary (``OpSub'')\1\ of a state bank,
---------------------------------------------------------------------------

    \1\ Generally, an operating subsidiary is subsidiary of a bank 
or savings association that only engages in activities that its 
parent bank or savings association may engage in.
---------------------------------------------------------------------------

     The scope and application of section 104(d) of the Gramm-
Leach-Bliley Act (``GLBA'') regarding preemption of certain state laws 
or actions that impose a requirement, limitation, or burden on a 
depository institution, or its affiliate, and
     Implementation of section 27 of the Federal Deposit 
Insurance Act (``FDI Act'') (which permits state depository 
institutions to export interest rates).
    The Petitioner argues that it is both necessary and timely for the 
FDIC to adopt rules that clarify the ability of state banks operating 
interstate to be governed by a single framework of law and regulation 
to the same extent as national banks. According to the Petitioner, over 
the last decade the federal charters for national banks and federal 
thrifts have been correctly interpreted by the Office of the 
Comptroller of the Currency (``OCC'') and the Office of Thrift 
Supervision (``OTS''), with the repeated support of the federal courts, 
to provide broad federal preemption of state laws that might otherwise 
apply to the activities or operations of federally-chartered banking 
institutions within a state. The result, it asserts, is that national 
banks and federal savings associations now can do business across the 
country under a single set of federal rules. In contrast, the 
Petitioner believes that there is widespread confusion and uncertainty 
with respect to the law applicable to state banks engaged in interstate 
banking activities. Furthermore, it argues, this uncertainty produces 
the potential for litigation and enforcement actions, deters state 
banks from pursuing profitable business opportunities, and causes 
substantial expense to a state bank that decides to convert to a 
national bank in order to gain greater legal certainty. Finally, the 
Petitioner asserts that the FDIC has the authority, tools and 
responsibility to correct this imbalance.

II. The FDIC's Approach to the Petition

    The FDIC will hold a hearing to obtain the public's views on the 
Petition. The FDIC believes that public participation will provide 
valuable insight into the issues presented by the Petition and will 
assist the FDIC in deciding how to respond to the rulemaking request. 
The FDIC's options include: (i) Denying the entire Petition, (ii) 
granting the entire Petition, (iii) granting the Petition in part and 
denying the Petition in part, and (iv) seeking further clarification of 
the Petition from the Petitioner. If the FDIC grants all or part of the 
Petition, a notice of proposed rulemaking will be published in the 
Federal Register, and an additional opportunity for public comment will 
be provided. The FDIC is interested in obtaining the views of the 
financial institutions industry, consumer groups, state financial 
institution supervisors, other state authorities, industry trade groups 
and the general public on the legal, policy, and other issues raised in 
the Petition.

III. Issues Presented by the Petition

    Although the FDIC is particularly interested in obtaining the 
public's views on the general and specific issues highlighted in this 
notice, we also are interested in the public's views on any other legal 
or policy issues implicated by the Petition. As a result, the FDIC 
encourages interested parties to address not only the highlighted 
issues, but also all other issues raised by the Petition.

A. General Issues

    With respect to the general issues raised by the Petition, the FDIC 
requests the public's views on the following:
    G-1. Is a preemptive rule in these areas necessary to preserve the 
dual banking system?
    G-2. What would be the impact on consumers if a preemptive rule 
were issued in these areas?
    G-3. What are the implications of rulemaking in these areas for 
state banking regulation?
    G-4. Would the measures urged by Petitioner achieve competitive 
balance between federally-chartered and state-chartered financial 
institutions as advocated by the Petitioner?
    G-5. Are there alternative mechanisms available that would achieve 
the policy goals advocated by the Petitioner?
    G-6. Should the issue of competitive parity in interstate 
operations be left to Congress?
    G-7. If the FDIC determines that it has the legal authority to 
proceed with a preemptive rule, are there reasons why the FDIC should 
decline to do so? If so, what are they?
    G-8. What would be the negative impact, if any, of the FDIC 
adopting a preemptive regulation as suggested by the Petitioner?
    G-9. Do the states have a legitimate interest in how banks conduct 
business within their borders that would be undermined by the 
Petitioner's request?
    G-10. Can state banks be expected to benefit if the FDIC were to 
preempt state law in the area of interstate banking operations? If so, 
how?
    G-11. What considerations should the FDIC take into account that 
either support or challenge the proposition that Congress intended to 
provide the comprehensive parity envisioned by the Petition?
    G-12. Is there a need for clarification on what law applies to the 
interstate operations of state banks?

B. Specific Issues

    Each of the five subject areas addressed by the Petition is 
described in summary fashion below. However, you are encouraged to read 
the Petition itself (which is attached) to gain complete details on the 
requested action. Each of the five subject areas is followed 
immediately by specific issues upon which the FDIC requests public 
input.
1. The law Applicable to Activities Conducted in a Host State by a 
State Bank That has an Interstate Branch in That State
    The Riegle-Neal Interstate Banking and Branching Efficiency Act of 
1994 (Riegle-Neal I'') \2\ generally established a federal framework 
for interstate branching for both state banks and national banks. Both 
Riegle-Neal I and amendments made to Riegle-Neal I by the Riegle-Neal 
Amendments Act of

[[Page 13415]]

1997 (``Riegle-Neal II'') \3\ contain express preemption provisions 
regarding which host state laws apply to a branch of an out-of-state 
bank.
---------------------------------------------------------------------------

    \2\ Public Law 103-328, 108 Stat. 2338 (1994) (codified to 
various sections of title 12 of the United States Code).
    \3\ Public Law 105-24 (1997).
---------------------------------------------------------------------------

    The Petitioner asserts that Congress enacted Riegle-Neal II to 
provide competitive equality between state banks and national banks 
with respect to interstate banking. Riegle-Neal II revised the language 
of section 24(j)(1) of the FDI Act to read as follows:

    The laws of the host state, including laws regarding community 
reinvestment, consumer protection, fair lending, and establishment 
of intrastate branches, shall apply to any branch in the host state 
of an out-of-state state bank to the same extent as such state laws 
apply to a branch in the host state of an out-of-state national 
bank. To the extent host state law is inapplicable to a branch of an 
out-of-state state bank in such host state pursuant to the preceding 
sentence, home state law shall apply to such branch.

    Riegle-Neal II, therefore, provides that host state law does not 
apply to a branch in the host state of an out-of-state, state bank to 
the same extent that host state law does not apply to a branch in the 
host state of an out-of-state national bank. When host state law does 
not apply, Riegle-Neal II provides that home state law applies. The 
Petition raises the issue of what law applies to activities of an out-
of-state, state bank in a host state in which the bank maintains a 
branch, when those activities are conducted by the bank directly, or 
through an OpSub, or by some means other than the branch. The 
Petitioner argues that the FDIC should issue a rule that provides that 
home state law applies uniformly to all business of the bank in that 
State, whether by the bank directly, through the host state branch, 
through a loan production office (``LPO''), or through some other non-
branch office, or through an OpSub.
    The FDIC requests the public's views on the following specific 
issues:
    1-1. What considerations should the FDIC take into account that 
either support or challenge the proposition that Congress granted the 
FDIC the authority to make home state law apply to all business 
conducted by a state bank in a host state in which the bank has a 
branch, whether conducted directly, or through a branch, a loan 
production office (an LPO), other office, or OpSub?
    1-2. If the FDIC were to adopt a rule as requested, who should 
determine for each state whether the NBA and OCC rules would preempt 
host state law for national banks?
    1-3. If the FDIC were to adopt a rule as requested, how should the 
applicable home state law be determined when the home state statute law 
is silent?
2. The law Applicable to Activities conducted by a State Bank in a 
State in Which the State Bank Does Not Have a Branch
    The Petitioner requests that the FDIC adopt rules to provide that 
the home state law of a state bank will apply to its activities in 
other states (i.e., any state other than its home state) to the same 
extent as the NBA applies to the activities of national banks. The 
Petitioner cites Riegle-Neal II and section 104(d) of GLBA as an 
indication of Congressional intent on this issue. In addition, 
Petitioner refers to principles of administrative law that permit an 
agency to reasonably fill in statutory gaps and address the application 
of existing laws to new developments.
    The FDIC requests the public's views on the following specific 
issue(s):
    2-1. What considerations should the FDIC take into account that 
either support or challenge the proposition that an out-of-state, state 
bank should be able to operate in a state where the bank has no 
branches under the bank's home state law to the same extent that an 
out-of-state national bank can operate under the NBA and OCC rules?
3. The law Applicable to Activities Conducted by an Operating 
Subsidiary (``OpSub'') of a State Bank
    The Petitioner requests that FDIC adopt a rule that expressly 
provides that an OpSub of a state bank will be governed by the same law 
that is applicable to its parent state bank, except when state law 
applies to an OpSub of a national bank.
    The FDIC requests the public's views on the following specific 
issues:
    3-1. What considerations should the FDIC take into account that 
either support or challenge the proposition that an OpSub should be 
able to operate under the bank's home state law to the same extent that 
an OpSub of a national bank can operate under the NBA and OCC rules?
    3-2. What considerations should the FDIC take into account that 
either support or challenge the proposition that an OpSub should be 
deemed equivalent to a division of the bank itself?
    3-3. If the FDIC were to adopt the requested rule, what 
requirements should the subsidiary meet in order to be considered an 
OpSub, e.g., should it be wholly-owned, majority-owned, or just 
controlled by the bank?
4. The Scope and Application of Section 104(d) of GLBA Regarding 
Preemption of Certain State Laws or Actions That Impose a Requirement, 
Limitation, or Burden on a Depository Institution, or Its Affiliate
    Section 104 of the GLBA (``section 104'') \4\ is titled ``Operation 
of State Law.'' It expresses the intent of Congress that the McCarran-
Ferguson Act which is entitled ``An Act to express the intent of 
Congress with reference to the regulation of the business of 
insurance'' \5\ ``remains the law of the United States.'' (Section 
104(a)). In addition, it: (a) Addresses insurance licensing 
requirements for persons engaged in the business of insurance; (b) 
addresses the extent to which a state may regulate affiliations between 
depository institutions and insurers; (c) addresses the extent to which 
states may impose restrictions on insurance sales by depository 
institutions; (d) indicates that states may not prevent or restrict 
depository institutions or their affiliates from engaging in activities 
authorized or permitted under GLBA; \6\ and (e) limits the ability of 
states to discriminate between depository institutions engaged in 
insurance activities authorized or permitted by GLBA or other federal 
law and others engaged in such activities.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 6701.
    \5\ 15 U.S.C. 1011 et seq. Among other things, the McCarran-
Ferguson Act provides that ``the business of insurance, and every 
person engaged therein, should be subject to the laws of the several 
states which relate to the regulation or taxation of such 
business.'' (15 U.S.C. 1012(a)) and that ``No Act of Congress shall 
be construed to invalidate, impair, or supersede any law enacted by 
any state for the purpose of regulating the business of insurance * 
* * unless such Act specifically relates to the business of 
insurance.'' (15 U.S.C. 1012(b)).
    \6\ See section 104(d)(1).
---------------------------------------------------------------------------

    The Petitioner contends that section 104(d) expressly preempts 
state laws or actions that discriminate against ``depository 
institutions'' or their affiliates. It urges the FDIC to exercise its 
authority under sections 8 and 9 of the FDI Act to adopt rules to make 
it clear that state laws, rules, or actions are preempted under section 
104(d) when they provide for disparate treatment between an out-of-
state national bank or in-state bank and an out-of-state state bank, or 
its affiliates. The Petitioner suggests, alternatively, that the FDIC 
adopt a statement of policy addressing the scope and effect of section 
104(d) for state banks. The Petitioner asserts that although state 
banks subject to FDIC regulation are the intended beneficiaries of this 
express preemption, the preemption is not being utilized by state banks 
because the statute is relatively new and complex and the relevant 
provisions have not be construed by any

[[Page 13416]]

agency or court. It states that rules are needed in view of the 
complexity and general lack of understanding of section 104(d).
    The Petitioner argues that the breadth of section 104(d) preemption 
and its purpose to reach state law or actions that would provide 
disparate treatment for any type of depository institution (including 
an out-of-state state bank) in relation to its competitors is evident 
from section 104(d)'s language.
    The Petitioner has described certain actions that if taken by the 
FDIC will, in its opinion, clarify by regulation or policy statement 
that state laws, rules, or actions cannot differentiate between in-
state and out-of-state banks. The Petitioner specifically requests that 
the FDIC issue a rule or policy statement: (a) Stating that the section 
104 preemption applies to insured banks and their subsidiaries, 
affiliates and associated persons; (b) defining a ``person'' to include 
a depository institution, subsidiary, affiliate, and associated person; 
(c) stating that the word restrict'' in section 104(d)(1) includes any 
state law, rule, interpretation or action that calls for any limitation 
or requirement; (d) addressing each of the four non-discrimination 
provisions in section 104(d)(4) to confirm that each is a distinct test 
and that any state law or action that fails one test is preempted; (e) 
addressing the scope of ``actions'' in section 104(d)(4) to include all 
types of formal or informal administrative actions by any state or 
local governmental entity, including decisions with respect to civil 
enforcement of state rules; (f) addressing section 104(d)(4)(D)(i) in 
light of the terms used in subparagraph (ii) to specify that paragraph 
(i) addresses treatment under state law of an out of state, state bank 
which would be an ``insured depository institution,'' that is different 
from the treatment of any national bank or in-state state bank which 
would be an ``other person engaged in the same activity'' under these 
provisions; and (g) defining ``state law'' to include laws, ordinances 
and rules of political subdivisions, including any counties and 
municipalities.
    The FDIC requests the public's views on the following specific 
issues:
    4-1. GLBA is a not codified as part of the FDI Act, is silent as to 
rulemaking and applies to all insured depository institutions. What 
barriers, if any, would there be to the FDIC adopting a regulation or 
policy statement implementing section 104?
    4-2. What considerations should the FDIC take into account that 
either support or challenge the proposition that section 104 preempts 
state law in the manner described by Petitioner?
    4-3. What barriers, if any, would there be to the FDIC adopting a 
regulation or policy statement applicable to all insured depository 
institutions based on section 104?
    4-4. Is it reasonable for the FDIC to read section 104 as having 
some application to interstate banking operations in general?
    4-5. The areas of section 104 Petitioner identifies for rulemaking 
are very discrete but taken together may have a broad impact. What are 
the overall implications (favorable as well as negative) of adopting 
the section 104 regulatory guidance suggested by the Petitioner?
5. Implementation of Section 27 of the FDI Act (Which Permits State 
Depository Institutions To Export Interest Rates)
    Section 27 of the FDI Act (``section 27'') \7\ establishes the 
maximum amount of interest that a state-chartered insured depository 
institution or insured branch of a foreign bank (collectively, ``state 
bank'') may charge its borrowers. Generally, the statute authorizes a 
state bank to charge interest at the greater of the rate allowed by the 
laws of the State, territory, or district where the bank is located or 
not more than one percentage point above the discount rate on 90-day 
commercial paper at the Federal Reserve bank for the Federal Reserve 
district where the bank is located.\8\ The statute also specifies that 
state banks may charge the rates authorized by the statute 
``notwithstanding any State constitution or statute which is hereby 
preempted for the purposes of this section.'' \9\ As is the case under 
section 85 of the NBA for national banks, section 27 allows state banks 
to charge out-of-state borrowers interest at the rates allowed by the 
law of the State where the bank is located, even if such rates exceed 
the usury limitations imposed by the borrower's state of residence.\10\
---------------------------------------------------------------------------

    \7\ 12 U.S.C. 1831d.
    \8\ Section 27 was added to the FDI Act by section 521 of the 
Depository Institutions Deregulation and Monetary Control Act of 
1980 (``DIDMCA'').
    \9\ Section 27(a) of the FDI Act; see generally Greenwood Trust 
Co. v. Commonwealth of Massachusetts, 971 F.2d 818 (1st Cir.), cert. 
denied, 506 U.S. 1052 (1993).
    \10\ This ability to charge interest at the rates allowed by the 
state where the bank is located is often referred to as the 
``exportation doctrine.''
---------------------------------------------------------------------------

    Section 27 contains two subsections which are patterned after 
provisions in the NBA. Subsection (a) corresponds to section 85 of the 
NBA (``section 85''),\11\ which addresses the interest rates that 
national banks are authorized to charge their borrowers. Subsection (b) 
corresponds to section 86 of the NBA (``section 86''),\12\ which 
addresses penalties and limitations of actions for charging interest in 
excess of the amount allowable under section 85.
---------------------------------------------------------------------------

    \11\ 12 U.S.C. 85.
    \12\ 12 U.S.C. 86.
---------------------------------------------------------------------------

    Because section 27 was enacted to provide state banks ``competitive 
equality'' with national banks and is patterned after the corresponding 
provisions in the NBA, the FDIC and the courts have construed section 
27 in virtually the same manner as the OCC and the courts have 
construed sections 85 and 86. For example, in General Counsel's Opinion 
No. 10 (``GC Opinion No. 10''),\13\ the FDIC's General Counsel 
concluded that section 27 and section 85 should be construed in pari 
materia and that the term interest, for purposes of section 27, 
includes those charges that a national bank is authorized to charge 
under section 85 and the OCC's interpretive rule defining interest for 
purposes of section 85.\14\ In General Counsel's Opinion No. 11 (``GC 
Opinion No. 11'') \15\ the FDIC's General Counsel interpreted section 
27 as applying to state banks operating interstate branches in a manner 
similar to the OCC's interpretation of the application of section 85 to 
national banks operating interstate branches. In GC Opinion No. 11 it 
was observed that, like an interstate national bank under section 85, a 
state bank is ``located'' in the state where it is chartered and in 
each state where it has a branch. GC Opinion No. 11 also addressed the 
criteria for determining when the state laws imposed by the bank's home 
state or host state should govern the amount of interest authorized on 
a loan transaction. In addition, the FDIC has interpreted section 27 as 
providing state banks: (a) The same ``most favored lender'' status 
under section 27 as national banks are provided under section 85; (b) 
the same right to export interest authorized by the state laws of the 
state where the bank is located to out-of-state borrowers; and (c) the 
same exclusive remedy for usury violations as is provided national 
banks under section 86.\16\
---------------------------------------------------------------------------

    \13\ GC Opinion No. 10, 63 FR 19258 (Apr. 17, 1998).
    \14\ 12 CFR 7.4001(a).
    \15\ GC Opinion No. 11, 63 FR 27282 (May 18, 1998).
    \16\ FDIC Advisory Opinion No. 81-3, February 3, 1981, reprinted 
in [1988-1989 Transfer Binder] Fed. Banking L. Rep. (CCH) ] 81,006; 
FDIC Advisory Opinion No. 81-7, March 17, 1981, reprinted in [1988-
1989 Transfer Binder] Fed. Banking L. Rep. (CCH) ] 81,008; FDIC 
Advisory Opinion No. 02-06, December 19, 2002, reprinted in Fed. 
Banking L. Rep. (CCH) ] 82-256.

---------------------------------------------------------------------------

[[Page 13417]]

    The Petitioner observes that the OCC and OTS have adopted rules 
codifying the scope of the relevant parallel interest provisions \17\ 
contained in their respective statutes.\18\ Therefore, the Petitioner 
requests that the FDIC adopt parallel provisions by rule to allow state 
banks to operate in a matching legal framework under section 27.
---------------------------------------------------------------------------

    \17\ 12 CFR 7.4001; 12 CFR 560.110.
    \18\ The relevant parallel interest provision for the OTS is 
section 4(g) of the Home Owners Loan Act (12 U.S.C. 1463(g)), which 
was derived from section 522 of DIDMCA.
---------------------------------------------------------------------------

    Therefore, the FDIC requests the public's views on the following 
specific issues:
    5-1. Should the FDIC adopt a parallel rule implementing section 27 
for state banks similar to 12 CFR 7.4001 and 12 CFR 560.110?
    5-2. Should any other issues be addressed by rulemaking to provide 
state banks competitive equality with national banks regarding section 
27? For example, 12 CFR 7.5009 addresses the location under section 85 
of national banks operating exclusively through the Internet. Is a 
similar rule needed for state banks under section 27?
    Under section 525 of the Depository Institutions Deregulation and 
Monetary Control Act states may ``opt-out'' of coverage under section 
27 at any time.\19\ The FDIC believes that Iowa, Puerto Rico, and 
Wisconsin are the only jurisdictions that have exercised this authority 
and not rescinded it.
---------------------------------------------------------------------------

    \19\ Section 525 of DIDMCA, like section 528 that provides 
lenders a choice of interest rates, is contained in various notes in 
the United States Code following the various sections that they 
affect. See, e.g., 12 U.S.C. 1831d (note).
---------------------------------------------------------------------------

    Therefore, the FDIC requests the public's views on the following 
specific issue:
    5-3. What effect would the exercise of the authority to opt-out of 
coverage under section 27 have on the rule or rules the Petitioner is 
requesting?

IV. Public Hearing

    The FDIC will hold a hearing to obtain the public's views on all 
issues raised by the Petition. The hearing will be held on Tuesday, May 
24th, 2005 from 8:30 a.m. to 5 p.m. in the Board room at the FDIC's 
headquarters, 550 17th Street, NW., Washington, DC. Hearing Officers 
designated by the FDIC will preside over the hearing. The hearing will 
be informal, and the rules of evidence will not apply. However, only 
the Hearing Officers may question a participant during a presentation. 
Each participant making an oral presentation at the hearing will be 
limited to 15 minutes. While oral presentations are limited to 15 
minutes, there is no limit on the length of a participant's written 
statement.
    Anyone wishing to make an oral presentation at the hearing must (i) 
deliver a written request to the Executive Secretary, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429 no 
later than 5 p.m. on Monday, May 9th, 2005; and (ii) deliver a copy of 
his or her written statement plus a two-page (or less) summary to the 
Executive Secretary no later than 5 p.m. on Monday, May 16th, 2005. 
Anyone wishing to submit a written statement of his or her views 
without making an oral presentation at the hearing may submit a 
limited-appearance statement. All limited-appearance statements must be 
received by the Executive Secretary no later than 5 p.m. on Monday, May 
16th, 2005. Attendance at the hearing is not required in order to 
submit a written statement. Each request to make an oral presentation 
and each participant's statement must include the participant's name, 
address, telephone number, e-mail address, and, if applicable, the name 
and address of the institution or organization the participant 
represents.
    Opportunities to make an oral presentation at the hearing are 
limited, and not all requests may be granted. The FDIC will notify each 
person who has submitted a request to make an oral presentation at the 
hearing whether the FDIC will be able to accommodate his or her 
request. The notice for each person whose request has been granted will 
include the time scheduled for his or her presentation and a tentative 
agenda. Depending upon the number of participants requesting an oral 
presentation, participants may be organized into panels of two or three 
to accommodate as many participants as possible.
    The hearing will be transcribed. The FDIC will provide attendees 
with any auxiliary aids (e.g., sign language interpretation) required 
for this meeting. Those attendees needing such assistance should call 
(202) 416-2089 (Voice); or (202) 416-2007 (TTY), to make necessary 
arrangements.

    Dated in Washington DC, this 16th day of March, 2005.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

Appendix: Petition for FDIC Rulemaking Providing Interstate Banking 
Parity for Insured State Banks, by Letter From the Financial Services 
Roundtable, 1001 Pennsylvania Ave., NW., Suite 500 South, Washington, 
DC 20004, Tel 202-289-4322, Fax 202-628-2507, dated March 4, 2005

March 4, 2005

Robert E. Feldman,
Executive Secretary, Federal Deposit Insurance Corporation, 550 
Seventeenth Street, NW., Washington, DC 20429.

Re: Petition for FDIC Rulemaking Providing Interstate Banking Parity 
for Insured State Banks

    Dear Mr. Feldman: The Financial Services Roundtable \1\ 
(``Roundtable'') respectfully petitions the Federal Deposit Insurance 
Corporation (``FDIC'') to promulgate rules under the Federal Deposit 
Insurance (``FDI'') Act and Section 104(d) of the Gramm-Leach-Bliley 
(``GLB'') Act, 15 U.S.C. 6701, to provide parity for state banks and 
national banks. Specifically, the proposed rule would provide that a 
state bank's home state law governs the interstate activities of 
insured state banks and their subsidiaries to the same extent that the 
National Bank Act governs a national bank's interstate business.
---------------------------------------------------------------------------

    \1\ The Financial Services Roundtable represents 100 of the 
largest integrated financial services companies providing banking, 
insurance, and investment products and services to the American 
consumer. Roundtable member companies provide fuel for America's 
economic accounting directly for $18.3 trillion in managed assets, 
$678 billion in revenue, and 2.1 million jobs.
---------------------------------------------------------------------------

    The FDIC has ample authority to take each of the requested actions 
pursuant to the broad delegation of authority in the FDI Act. It is now 
clear that FDIC action is required to achieve the result that Congress 
sought in the 1997 amendment to the Riegle-Neal Interstate Banking and 
Branching Efficiency Act of 1994 (``Riegle-Neal I''), Pub. L. 103-328, 
108 Stat. 238. See Riegle-Neal Amendments Act of 1997, Pub. L. 105-24 
(1997) (amending 12 U.S.C. 1831a(j)) (``Riegle-Neal II''). The 
requested rulemaking would implement the historic decision of Congress 
in 1997 to provide competitive equality for state banks and national 
banks in interstate banking.
    The Roundtable submits that it is both necessary and timely for the 
FDIC to adopt rules making clear the ability of state banks operating 
interstate to be

[[Page 13418]]

governed by a single framework of law and regulation to the same extent 
as national banks. Such an action would ensure the continued vitality 
of the dual banking system. Accordingly, the Roundtable requests that 
the FDIC promulgate rules that:
    1. Clarify that the governing law applicable to activities 
conducted in a host state by a state bank that has an interstate branch 
in that state is its home state law to the same extent that host state 
law is preempted by the National Bank Act. The FDIC should make clear 
that ``home'' state law applies to an out-of-state state bank in a 
``host'' state to the same extent as the National Bank Act applies to 
an out-of-state national bank, whether the business of the bank is 
conducted by the bank through the host state branch, by or through an 
operating subsidiary, or by any other lawful means.
    2. Clarify that the governing law applicable to activities 
conducted by a state bank in a state in which the state bank does not 
have a branch is its home state law to the same extent that host state 
law is preempted by the National Bank Act. The FDIC should make clear 
that a state bank may operate under home state law in any other state 
to the same extent that an out-of-state national bank may operate under 
the National Bank Act or under rules promulgated by the Comptroller of 
the Currency (``OCC''). Such a rule would give effect to the policy 
underlying Riegle-Neal II and the preemption of discriminatory state 
law provided in Section 104(d) of the Gramm-Leach-Bliley (``GLB'') Act 
(``Section 104(d)''), 15 U.S.C. 6701(d).
    3. Clarify that the law applicable to activities conducted by an 
operating subsidiary of a state bank is the same law applicable to the 
bank itself. The FDIC should clarify that when a state bank has 
established an ``operating subsidiary'' pursuant to its home state law, 
that subsidiary will be treated under FDIC rules as if it were the 
state bank itself. Thus, the operating subsidiary will be subject to 
state law outside its home state in the same manner as its bank parent 
is subject to such state law. Such rules would allow state bank 
operating subsidiaries to engage in interstate business under the same 
uniform rules as its parent bank, just as national bank operating 
subsidiaries operate under uniform OCC rules.
    4. Adopt rules construing the scope and application of Section 
104(d) to make clear that a state law or action is expressly preempted 
under Section 104(d) when it imposes a requirement, limitation, or 
burden on a state bank, or its affiliate, that does not also apply to 
an out-of-state national bank or in-state bank. Section 104(d) 
expressly preempts state laws or actions that discriminate against 
``insured depository institutions','' or their affiliates, as defined 
in the FDI Act. Accordingly, Section 104(d) provides independent basis 
and support for each of the above requests. Moreover, through 
implementing rules, the FDIC would provide greater certainty to insured 
state banks with respect to the scope of this express federal 
preemption in general. This provision is not well understood and we 
believe that a rulemaking, not litigation, is the appropriate means to 
carry out Congressional intent and achieve needed clarity.
    5. Implement Section 27 of the FDI Act by adopting a rule parallel 
to the rules promulgated by the OCC and Office of Thrift Supervision 
(``OTS''). The scope and implementation of the express preemption for 
the ``interest rate'' charged in interstate lending transactions by 
state and national banks under Section 27 of the FDI Act and Section 85 
of the National Bank Act has been authoritatively addressed by the 
courts and in agency interpretations. The OCC and OTS have adopted 
rules codifying the scope of the respective statutory provisions for 
federal institutions. The FDIC should adopt a parallel rule for insured 
state banks and thus codify existing agency interpretations.
    In this letter, we will address (A) the urgent need for the 
requested rulemaking and the real costs of inaction, (B) the FDIC's 
authority to promulgate rules of the scope requested, (C) the 
legislative history demonstrating that Congress specifically intended 
in Riegle-Neal II to prevent erosion of the dual banking system and in 
Section 104(d) to prevent disparate treatment and ensure that all banks 
could compete on relatively equal terms in today's interstate financial 
services marketplace, and (D) the scope of the proposed rule provisions 
in greater detail. The Roundtable appreciates the FDIC's consideration 
of this petition.

A. A Rulemaking Is Necessary and the Costs of Inaction Will Be 
Significant

    The requested FDIC action in this petition is necessary to complete 
the task of restoring balance in the dual banking system that Congress 
sought to achieve in 1997. Riegle-Neal II reversed a decision in 1994 
to treat state and national banks differently with respect to 
``applicable law.'' In Riegle-Neal I, state and national banks were 
under the same rules for the establishment of interstate branches. 
However, Riegle-Neal I provided that when a national bank branched 
interstate into a host state, it was in effect generally subject to the 
National Bank Act,\2\ while the state bank in a parallel case was made 
subject to host state law. While interstate national banks could 
operate under a single law, interstate state banks were subjected to 
multiple state laws.
---------------------------------------------------------------------------

    \2\ The Riegle-Neal applicable law provision for national banks 
states: ``(A) In general The laws of the host State regarding 
community reinvestment, consumer protection, fair lending, and 
establishment of intrastate branches shall apply to any branch in 
the host State of an out-of-State national bank to the same extent 
as such State laws apply to a branch of a bank chartered by that 
State, except--(i) when Federal law preempts the application of such 
State laws to a national bank; or (ii) when the Comptroller of the 
Currency determines that the application of such State laws would 
have a discriminatory effect on the branch in comparison with the 
effect the application of such State laws would have with respect to 
branches of a bank chartered by the host State.'' 12 U.S.C. 
36(f)(1)(A). The effect of this provision is that any host state 
law, including a community reinvestment, consumer protection, fair 
housing, or intrastate branching law, that is preempted under the 
National Bank Act does not apply to the national bank branch (or the 
bank) in the host state.
---------------------------------------------------------------------------

    That disparity led Congress in 1997 to amend Riegle-Neal to adopt 
an applicable law provision for state banks that closely tracked the 
national bank provision in Section 36(f) of the National Bank Act.\3\ 
The purpose of the 1997 amendment, which was stated repeatedly by its 
sponsors, was to provide parity between state banks and national banks 
with respect to interstate banking.\4\ By ``parity,'' they plainly 
meant the ability of state banks to do business interstate under a 
uniform law (home state law) just as national banks were authorized to 
do under Riegle-Neal.\5\
---------------------------------------------------------------------------

    \3\ Compare 12 U.S.C. 1831a(j)(1) (text in footnote 9) with 12 
U.S.C. 36(f)(1)(A) (text in footnote 2).
    \4\ As stated by the led sponsor in the House, Rep. Roukema: 
``The essence of this legislation is to provide parity between 
state-chartered banks and national banks.'' 143 Cong. Rec. H3088 
(daily ed. May 21, 1997).
    \5\ See, e.g., statements by the principal sponsors of the 1997 
Amendment, Rep. Roukema (``* * * we have * * * with this action, 
protected the dual banking system while at the same time gaining the 
advantages of interstate banking''), 143 Cong. Rec. H4231 (daily ed. 
June 24, 1997), and Chairman D'Amato (``Enactment of H.R. 1306 also 
would bolster efforts of New York and other states to make sure that 
State[-]chartered banks have the powers they need to compete 
efficiently and effectively in an interstate environment''), 143 
Cong. Rec. S5637 (daily ed. June 12, 1997).
---------------------------------------------------------------------------

    Over the last decade, the federal charters for national banks and 
federal thrifts have been correctly interpreted by the OCC and OTS, 
with the repeated support of the federal courts, to provide broad 
federal preemption of state laws that might appear to apply to the 
activities or operations of a banking institution in that state. The 
result is that, in general, national banks and

[[Page 13419]]

federal thrifts now can do business across the country under a single 
set of federal rules. This framework is appropriate for these federal 
entities in a national financial marketplace. At the same time, in this 
marketplace a uniform national bank system based on preemption and 
interstate banking undoubtedly presents a major challenge to the dual 
banking system and state banks.
    In contrast to the general certainty enjoyed by federal 
institutions, there is widespread confusion and uncertainty with 
respect to applicable law governing state banks engaged in interstate 
banking activities. The current uncertainty governing the interstate 
activities of state banks has had, and will continue to have, several 
significant adverse effects. Uncertainty carries the potential for 
litigation and enforcement actions arising from disagreements between 
regulators, or between a host state regulator and a state bank engaged 
in interstate activity. Regulatory uncertainty deters state banks from 
pursuing profitable business opportunities. When a state bank converts 
to a national charter to gain greater legal certainty, it incurs 
substantial expense. Each of these consequences has economic 
significance for state banks and direct implications for the FDIC's 
enforcement and safety-and-soundness responsibilities.
    Moreover, a series of recent major merger and conversion 
transactions has resulted in an unprecedented migration of assets to 
the national banking system. It is now apparent that, absent a more 
certain federal regulatory environment, the state charter will continue 
to be perceived as less competitive than a national bank charter.
    This is the very result that Congress intended to prevent.\6\ In 
1994, 1997 and 1999 Congress took bold and historic actions to provide 
uniform federal rules to govern all interstate banking and to ensure 
that individual state laws could not disfavor any type of depository 
institution in the multistate financial services marketplace. It is now 
apparent that the express terms of these statutes have not on their own 
force been able to ensure, as Congress intended in enacting Riegle-Neal 
II, that state banks can participate in interstate banking business on 
a par with national banks and that state banks face significant state 
law obstacles when they seek to do business outside their home state. 
As a consequence, the state banking system, as we have known it, is 
fundamentally threatened.
---------------------------------------------------------------------------

    \6\ The statement by Rep. LaFalce before final House passage of 
the 1997 amendments captures the purpose to redress the negative 
effects of the 1994 Riegle-Neal applicable provision for state 
banks: ``Why [must we act now]? Well, it is due to the fact that the 
national bank regulator has the authority to permit national banks 
to conduct operations in all the states with some level of 
consistency. In contrast, under the existing interstate legislation, 
state banks branching outside their home state must comply with a 
multitude of different state banking laws in each and every state in 
which they operate.'' 143 Cong. Rec. H3094 (daily ed. May 27, 1997). 
See the discussion of the legislative history in the next section.
---------------------------------------------------------------------------

    In the national financial services marketplace, consumers and 
providers benefit when banks can provide products and services under a 
single legal framework applicable across state lines. At the same time, 
bank customers and the economy also benefit from the diversity, 
innovation and checks provided by a strong and dynamic dual banking 
system involving large, regional, and small banks. From the perspective 
of all parties--consumers, financial institutions, and regulators--
further development of a framework of state bank regulation and 
supervision that is effective, efficient, and seamless across state 
lines is the right goal. In today's multistate system, that is an 
essential goal. A banking system in which virtually all interstate 
banks have national charters and state banks are overwhelmingly local 
is not the dual banking system this country has historically enjoyed. 
The dual banking system will retain the dynamic vitality that has made 
it a mainspring for progress and strength in banking only if it can 
provide meaningful interstate competitive parity for all interstate 
state banks, whether cross-border, regional, or national. Significant 
and unacceptable disparity exists today.
    The FDIC has the authority, tools, and responsibility under the FDI 
Act to correct this imbalance. To implement Congressional intentions it 
now must promptly provide a uniform interstate applicable law regime 
for state banks and give practical reality to the express preemption of 
discriminatory state laws.

B. The FDIC Has Authority To Adopt the Requested Rules

    The FDIC has ample rulemaking authority to address each of the 
Roundtable's requests. Section 9 of the FDI Act vests the FDIC with 
broad authority to adopt rules ``it may deem necessary to carry out the 
provisions of this Act or of any other law which it has the 
responsibility of administering or enforcing.'' 12 U.S.C. 1819.\7\
---------------------------------------------------------------------------

    \7\ The FDIC's rulemaking authority parallels the OCC's 
authority. See 12 U.S.C. 93(a) ((``the Comptroller of the Currency 
is authorized to prescribe rules and regulations to carry out the 
responsibilities of the office''). The statutory provision 
authorizing the OCC to issue rules is directly analogous to Section 
9 of the FDI Act. Compare 12 U.S.C. 1819 (FDIC vested with authority 
``to prescribe * * * such rules and regulations as it may deem 
necessary to carry out the provisions of this chapter or of any 
other law which it has the responsibility of administering or 
enforcing * * *'').
---------------------------------------------------------------------------

    The FDIC is vested with responsibility for administering Sections 
24 and 27 of the Act to accomplish what Congress intended. Congress, 
through Section 9, has vested the FDIC with authority to carry out 
Sections 24 and 27. Moreover, under basic principles of administrative 
law, agency rules that fill or address a statutory gap generally are 
afforded considerable deference by courts. See Chevron U.S.A., Inc. v. 
Natural Resources Defense Council, Inc., 467 U.S. 837, 865 (1984) 
(``Chevron''). Section 9's ``generally conferred authority'' makes it 
apparent ``that Congress would expect the agency to be able to speak 
with the force of law when it addresses ambiguity in the statute or 
fills a space in the enacted law, even one about which `Congress did 
not actually have an intent' as to a particular result.'' United States 
v. Mead, 533 U.S. 218, 229 (2001) (quoting Chevron, 467 U.S. at 845).
    Riegle-Neal I and II fundamentally changed federal law for state 
and national banks by authorizing banks to engage fully in banking 
transactions in other states through interstate branching.\8\ As a 
corollary, Riegle-Neal I provided federal ``applicable law'' statutes 
to govern the new interstate banking regime. As originally enacted, the 
respective applicable law provisions treated national and state banks 
differently. Riegle-Neal II sought to redress that disparity and 
provided substantively the same rule for state banks as was originally 
provided for national banks.\9\ The FDIC plainly has authority to 
implement Riegle-Neal II.
---------------------------------------------------------------------------

    \8\ Prior to enactment of Riegle-Neal, neither state nor 
national banks could establish branches outside their home state. 
Moreover, except with respect to interest charges under 12 U.S.C. 85 
and 12 U.S.C. 1831d, federal law did not provide guidance to either 
state banks or national banks regarding the law applicable to 
transactions that banks made with customers outside their home 
states.
    \9\ See generally section 24(j):
    (j) ACTIVITIES OF BRANCHES OF OUT-OF-STATE BANKS.--
    (1) APPLICATION OF HOST STATE LAW.--The laws of a host State, 
including laws regarding community reinvestment, consumer 
protection, fair lending, and establishment of intrastate branches, 
shall apply to any branch in the host State of an out-of-State 
national bank. To the extent host State law is inapplicable to a 
branch of an out-of-State bank in such host State pursuant to the 
preceding sentence, home State law shall apply to such branch.
    (2) ACTIVITIES OF BRANCHES.--An insured State bank that 
establishes a branch in a host State may conduct any activity at 
such branch that is permissible under the laws of the home State of 
such bank, to the extent such activity is permissible either for a 
bank chartered by the host State (subject to the restrictions in 
this section) or for a branch in the host State of an out-of-State 
national bank.
    (3) SAVINGS PROVISION.--No provision of this subsection shall be 
construed as affecting the applicability of--
    (A) any State law of any home State under subsection (b), (c), 
or (d) of section 44; or
    (B) Federal law to State banks and State bank branches in the 
home State or the host State.
    (4) DEFINITIONS.--The terms ``host State'', ``home State'', and 
``out-of-State bank'' have the same meanings as in section 44(f). 12 
U.S.C. 1831a(j).

---------------------------------------------------------------------------

[[Page 13420]]

    The FDIC also has the authority to implement the nondiscrimination 
provisions of Section 104(d) insofar as the GLB Act addresses state 
insured depository institutions and to construe the express preemption 
of discriminatory state law provided in Section 104(d). Section 9 vests 
the FDIC with authority to promulgate rules to carry out any statute 
the FDIC is responsible for administering or enforcing. The provisions 
of the GLB Act that touch upon state depository institutions fall 
within the regulatory ambit of the FDIC.
    A statutory gap, or a clarification of a statute to effect 
Congressional intent, can be--and should be--addressed by an agency 
rule. Where, as here, a statute is ambiguous regarding its application 
to ``a particular result'' (Mead, 533 U.S. at 229), courts have long 
recognized that agencies with rule-making authority must be permitted 
to address the statutory gap as ``necessary for the orderly conduct of 
its business.'' United States v. Storer Broadcasting Co., 351 U.S. 192, 
202-03 (1956) (finding also that the statute ``must be read as a whole 
and with appreciation of the responsibilities of the body charged with 
its fair and efficient operation''), National Petroleum Refiners Ass'n, 
482 F.2d at 681. (``[T]here is little question that the availability of 
substantive rule-making gives any agency an invaluable resource-saving 
flexibility in carrying out its task of regulating parties subject to 
its statutory mandate.''). Courts have consistently applied these 
administrative law principles--and extended Chevron deference--to rules 
and regulations issued by the FDIC under its broad rulemaking 
authority.\10\ There can be little doubt that Section 9 of the FDI Act 
vests the FDIC with authority to address these issues.\11\
---------------------------------------------------------------------------

    \10\ See, e.g., National Council of Savings Institutions v. 
FDIC, 664 F.Supp. 572 (D.D.C. 1987) (sustaining FDIC regulation 
governing the proper relationship between FDIC-insured banks and 
their securities-dealing ``subsidiaries'' or ``affiliates'') See 
also Wells Fargo Bank, N.A. v. FDIC, 310 F.3d 202, 208 (D.C. Cir. 
2002) (affording Chevron deference to FDIC rule for ``second 
generation'' transactions, because statute was silent as to 
treatment of these transactions and rule would ``implement 
Congressional intent because it prevents financial institutions from 
manipulating the system''); America's Community Bankers v. FDIC, 200 
F.3d 822, 834 (D.C. Cir 2000) (upholding FDIC denial of refund 
assessment under Chevron, where statute merely stated that FDIC 
could utilize ``any other factors'' to ``set'' the assessment amount 
and thus was ``facially ambiguous''); Federal Deposit Ins. Corp. v. 
Sumner Financial Corp., 451 F.2d 898, 902-903 (5th Cir. 1971) 
(affording ``great deference'' to FDIC interpretation of FDI Act 
through regulation concerning advertising by regulated banks).
    \11\ Riegle-Neal I and II provide express ability for a state 
bank to establish a branch in a host state, to thus gain the ability 
to engage in any or all of its permitted activities in that host 
state, and to apply its home state law (unless a national bank, and 
thus the state bank, must apply host state law) to that branch. But 
the statutory text does not directly address the governing law 
applicable to the state bank's activities permitted in the host 
state under the authority provided by Riegle-Neal, but conducted by 
the bank outside of its branch, by an operating subsidiary or 
another means. An ordinary task of a regulatory agency is to 
construe such a statutory provision in a rule.
---------------------------------------------------------------------------

    There is no reason that a rulemaking by the FDIC similar to ones 
conducted by the OCC should be analyzed any differently. The National 
Bank Act does not expressly address the law applicable to a national 
bank outside states where it has branches. Prior to the adoption of the 
OCC rules, a number of courts determined that national banks were 
subject to state laws that did not conflict with the provisions of the 
National Bank Act.\12\ Nonetheless, the courts have upheld the OCC 
rules and determinations that make clear that national banks and their 
operating subsidiaries are governed by the National Bank Act wherever 
they do business. These OCC rules have generally received Chevron 
deference.\13\
---------------------------------------------------------------------------

    \12\ See National State Bank v. Long, 630 F.2d 981 (3d Cir. 
1980); Perdue v. Crocker National Bank, 702 P.2d 503 (Cal. 1985); 
Best v. U.S. National Bank, 739 P.2d 554 (Or. 1987).
    \13\ See, e.g., NationsBank of N.C. v. VALIC, 513 U.S. 251 
(1995); Barnett Bank of Marion County v. Nelson, 517 U.S. 25, 33 
(1996); Wachovia Bank, N.A. v. Watters, 334 F. Supp. 2d, 957, 963-65 
(W.D. Mich. 2004); Wachovia v. Burke, 319 F. Supp. 2d 275 (D. Conn. 
2004).
---------------------------------------------------------------------------

    Further, under Section 8 of the FDI Act, an insured bank may be 
subject to an enforcement action of the FDIC if ``in the opinion of the 
appropriate Federal banking agency, any insured depository institution, 
depository institution which has insured deposits, or any institution-
affiliated party is engaging or has engaged, or the agency has 
reasonable cause to believe that the depository institution or any 
institution-affiliated party is about to engage, in an unsafe or 
unsound practice in conducting the business of such depository 
institution, or is violating or has violated, or the agency has 
reasonable cause to believe that the depository institution or any 
institution-affiliated party is about to violate, a law, rule, or 
regulation.'' 12 U.S.C. 1818(b)(1). The FDIC has authority to adopt 
rules with respect to legal compliance by insured banks that provide 
guidance to those banks and agency staff charged with making 
supervisory, enforcement and examination decisions. That can be 
accomplished by using authority under Section 9 to address issues of 
compliance with state law, including the meaning and scope of Section 
104.\14\
---------------------------------------------------------------------------

    \14\ The FDIC previously has engaged in a rulemaking in 
comparable circumstances. In 1982, the FDIC adopted a Statement of 
Policy addressing the applicability of the Glass-Steagall Act to 
securities activities of subsidiaries of insured nonmember banks. 47 
FR 38984, September 3, 1982. That Statement of Policy construed 
Section 20 of the Glass-Steagall Act and concluded that the 
restrictions in that section on securities affiliates of insured 
banks did not prevent insured nonmember banks subject to the FDIC's 
regulation and supervision from having ``bona fide'' securities 
affiliates or subsidiaries. The provisions of Glass-Steagall 
construed in the Statement of Policy (like the provisions of GLB at 
issue here) were not part of the FDI Act, but the FDIC issued a rule 
to provide clear guidance to insured state banks, and the exercise 
of the FDIC's rulemaking authority in that case was upheld. See 
National Council of Savings Institutions v. FDIC, 664 F.Supp. 572 
(D.D.C. 1987). Issuing guidance to state insured banks concerning 
the scope of Section 104 of the GLB Act is a necessary and 
appropriate exercise of the FDIC's authority to carry out its 
regulatory mandate.
---------------------------------------------------------------------------

C. The Requested Rulemakings Would Advance the Congressional Purpose To 
Prevent Erosion of the Dual Banking System by Maintaining Parity 
Between State and National Banks

    Beginning with the enactment of Section 27, Congress has taken bold 
and historic action on more than one occasion to preempt a wide range 
of state laws so that state banks can operate on a par with national 
banks in the multistate financial services marketplace that has come 
into existence in recent decades. The broad sweep of what Congress 
intended to accomplish is evident in the terms and legislative history 
of Riegle-Neal II and Section 104(d). Those statutes further the 
decades-old principle of competitive equality embodied in federal law 
and repeatedly recognized by the courts and the FDIC.\15\ The requested 
FDIC rule would implement these Congressional purposes.
---------------------------------------------------------------------------

    \15\ See First Nat'l Bank v. Walker Bank & Trust Co., 385 U.S. 
252 (1966); First Nat'l Bank in Plant City v. Dickinson, 396 U.S. 
122 (1969); FDIC Advisory Letter 00-5.
---------------------------------------------------------------------------

    The principle of fundamental competitive parity has been woven by 
Congress and the courts into the very fabric of the dual banking 
system. The dual system was created when Congress created the national 
bank system alongside the state banking system. In the Federal Reserve 
Act, Congress expressly provided for state banks, as well as national 
banks, to be member

[[Page 13421]]

banks. The McFadden Act as passed and as amended in the 1930s embodied 
a federal policy of competitive equality in branching. In the FDI Act, 
deposit insurance was made available to all state and national banks.
    Since 1980, Congress has amended the FDI Act to ensure state-
national bank parity, to ensure a strong and balanced dual banking 
system, and to prevent discriminatory state laws from favoring one type 
of charter over another. In 1980, in response to the challenges 
presented by the 1978 Marquette case, Congress provided interstate 
usury parity for state banks in Section 27 of the FDI Act.\16\ See 12 
U.S.C. 1831d(a). In 1991, Congress addressed state laws providing state 
banks more expansive powers than national banks, a disparity in favor 
of state banks that Congress believed had implications for safety-and-
soundness, bank competitiveness, and the dynamic for change in the dual 
banking system. That enactment provided that state bank activities 
would be limited to activities permissible for national banks, unless 
the FDIC determined that for a state bank to engage in an otherwise 
impermissible activity would not pose a significant risk to the deposit 
insurance fund. See 12 U.S.C. 1831a(a)-(e). This policy of parity was 
continued in Riegle-Neal and the GLB Act.
---------------------------------------------------------------------------

    \16\ See Marquette Nat'l Bank of Minneapolis v. First of Omaha 
Serv. Corp., 439 U.S. 299 (1978).
---------------------------------------------------------------------------

1. The Legislative History of Riegle-Neal Amendments Demonstrates 
Congressional Purpose to Provide Parity Between National Banks and 
State Banks

    In Riegle-Neal, Congress reversed more than 150 years of federal 
policy and enacted comprehensive federal laws governing interstate 
banking for all banks. Except for the applicable law provisions, 
Riegle-Neal as originally enacted gave parallel treatment to state and 
national banks