Watters v. Wachovia Bank
Wachovia Bank sued Watters, the Commissioner of the Michigan Office of Insurance and Financial Services, for a declaratory judgment stating that the National Bank Act and its regulations preempt the state of Michigan from regulating national banks. Wachovia also sought an injunction to prevent Michigan from stopping Wachovia’s mortgage lending activities. Wachovia Bank is a national banking association. Wachovia Mortgage registered under Michigan law to make mortgage loans, and later became a wholly owned subsidiary of Wachovia Bank. On April 3, 2003, Wachovia Mortgage advised the State of Michigan that it was surrendering its lending registration in Michigan. The Commissioner responded by advising Wachovia Mortgage
that it would no longer be authorized to conduct mortgage lending activities within the state. Wachovia sought a declaration that the the Michigan statutes at issue are preempted by the National Banking Act.
Under 12 U.S.C. § 484(a), national banks are not subject to state “visitorial powers,” which are inspection and regulatory powers, except when allowed by federal law. The Office of the Comptroller of the Currency (OCC), the federal administrative agency in charge of regulating banking, issued 12 C.F.R. § 7.4000, which prevents states from using visitorial powers on national banks. The OCC also promulgated the rule that the laws apply equally to national banks and their subsidiaries in 12 C.F.R. § 7.4006. Michigan argued that a subsidiary of a national bank with a state rather than a national charter should not fall under the definition of a national bank, and that preventing a state from regulating a state entity violates the Tenth Amendment.
The district court granted Wachovia’s motion for summary judgment, and the United States Court of Appeals for the Sixth Circuit affirmed. The Sixth Circuit applied the analysis used in the United States Supreme Court case Chevron U.S.A., Inc. v. Natural Resources Defense Council. Under Chevron, the courts must defer to administrative agencies unless the actions of the agencies are contrary to the statute enabling their power or are unreasonable interpretations of the statute. The court found that, although the statute was silent on the issue, the OCC's interpretation was reasonable in light of the OCC’s power to both exclusively regulate banks and also regulate powers incidental to banking. Also, the Tenth Amendment did not apply because the National Bank Act was a valid use of Congress’s Commerce Clause power, and the Tenth Amendment only protects unenumerated powers.
Questions Presented:
(1) 12 U.S.C. § 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 C.F.R. § 7.4006, made 12 U.S.C. § 484(a) equally applicable to State-chartered nonbank "operating subsidiaries" of national banks. Is the interpretation of the Comptroller of the Currency that 12 C.F.R. § 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 DefenseCouncil?
(2) A national bank has been declared to be a national corporation in Guthrie v Harkness. 12 C.F.R. § 7.4006 treats a State-chartered nonblank 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. Does 12 C.F.R. § 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
