(Slip Opinion) OCTOBER TERM, 2006 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
WATTERS, COMMISSIONER, MICHIGAN OFFICE
OF INSURANCE AND FINANCIAL SERVICES
v. WACHOVIA BANK, N. A., ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE SIXTH CIRCUIT
No. 05–1342. Argued November 29, 2006—Decided April 17, 2007
National banks’ business activities are controlled by the National Bank
Act (NBA), 12 U. S. C. §1 et seq., and regulations promulgated there
under by the Office of the Comptroller of the Currency (OCC), see
§§24, 93a, 371(a). OCC is charged with supervision of the NBA and,
thus, oversees the banks’ operations and interactions with customers.
See NationsBank of N. C., N. A. v. Variable Annuity Life Ins. Co., 513
U. S. 251, 254, 256. The NBA grants OCC, as part of its supervisory
authority, visitorial powers to audit the banks’ books and records,
largely to the exclusion of other state or federal entities. See §484(a);
12 CFR §7.4000. The NBA specifically authorizes federally chartered
banks to engage in real estate lending, 12 U. S. C. §371, and “[t]o ex
ercise . . . such incidental powers as shall be necessary to carry on the
business of banking,” §24 Seventh. Among incidental powers, na
tional banks may conduct certain activities through “operating sub
sidiaries,” discrete entities authorized to engage solely in activities
the bank itself could undertake, and subject to the same terms and
conditions as the bank. See §24a(g)(3)(A); 12 CFR §5.34(e).
Respondent Wachovia Bank is an OCC-chartered national banking
association that conducts its real estate lending business through re
spondent Wachovia Mortgage Corporation, a wholly owned, North
Carolina-chartered entity licensed as an operating subsidiary by
OCC, and doing business in Michigan and elsewhere. Michigan law
exempts banks, both national and state, from state mortgage lending
regulation, but requires their subsidiaries to register with the State’s
Office of Insurance and Financial Services (OIFS) and submit to state
supervision. Although Wachovia Mortgage initially complied with
2 WATTERS v. WACHOVIA BANK, N. A.
Syllabus
Michigan’s requirements, it surrendered its Michigan registration
once it became a wholly owned operating subsidiary of Wachovia
Bank. Subsequently, petitioner Watters, the OIFS Commissioner,
advised Wachovia Mortgage it would no longer be authorized to en
gage in mortgage lending in Michigan. Respondents sued for de
claratory and injunctive relief, contending that the NBA and OCC’s
regulations preempt application of the relevant Michigan mortgage
lending laws to a national bank’s operating subsidiary. Watters re
sponded that, because Wachovia Mortgage was not itself a national
bank, the challenged Michigan laws were applicable and were not
preempted. She also argued that the Tenth Amendment to the U. S.
Constitution prohibits OCC’s exclusive regulation and supervision of
national banks’ lending activities conducted through operating sub
sidiaries. Rejecting those arguments, the Federal District Court
granted the Wachovia plaintiffs summary judgment in relevant part,
and the Sixth Circuit affirmed.
Held:
1. Wachovia’s mortgage business, whether conducted by the bank
itself or through the bank’s operating subsidiary, is subject to OCC’s
superintendence, and not to the licensing, reporting, and visitorial
regimes of the several States in which the subsidiary operates.
Pp. 5–17.
(a) The NBA vests in nationally chartered banks enumerated
powers and all “necessary” incidental powers. 12 U. S. C. §24 Sev
enth. To prevent inconsistent or intrusive state regulation, the NBA
provides that “[n]o national bank shall be subject to any visitorial
powers except as authorized by Federal law . . . .” §484(a). Federally
chartered banks are subject to state laws of general application in
their daily business to the extent such laws do not conflict with the
letter or purposes of the NBA. But when state prescriptions signifi
cantly impair the exercise of authority, enumerated or incidental un
der the NBA, the State’s regulations must give way. E.g., Barnett
Bank of Marion Cty., N. A. v. Nelson, 517 U. S. 25, 32–34. The NBA
expressly authorizes national banks to engage in mortgage lending,
subject to OCC regulation, §371(a). State law may not significantly
burden a bank’s exercise of that power, see, e.g., Barnett Bank, 517
U. S., at 33–34. In particular, real estate lending, when conducted by
a national bank, is immune from state visitorial control: The NBA
specifically vests exclusive authority to examine and inspect in OCC.
12 U. S. C. §484(a). The Michigan provisions at issue exempt na
tional banks themselves from coverage. This is not simply a matter
of the Michigan Legislature’s grace. For, as the parties recognize, the
NBA would spare a national bank from state controls of the kind here
involved. Pp. 5–10.
Cite as: 550 U. S. ____ (2007) 3
Syllabus
(b) Since 1966, OCC has recognized national banks’ “incidental”
authority under §24 Seventh to do business through operating sub
sidiaries. See 12 CFR §5.34(e)(1). That authority is uncontested by
Michigan’s Commissioner. OCC licenses and oversees national bank
operating subsidiaries just as it does national banks. See, e.g.,
§5.34(e)(3); 12 U. S. C. §24a(g)(3)(A). Just as duplicative state ex
amination, supervision, and regulation would significantly burden
national banks’ mortgage lending, so too those state controls would
interfere with that same activity when engaged in by a national
bank’s operating subsidiary. This Court has never held that the
NBA’s preemptive reach extends only to a national bank itself; in
stead, the Court has focused on the exercise of a national bank’s pow
ers, not on its corporate structure, in analyzing whether state law
hampers the federally permitted activities of a national bank. See,
e.g., Barnett Bank, 517 U. S., at 32. And the Court has treated oper
ating subsidiaries as equivalent to national banks with respect to
powers exercised under federal law (except where federal law pro
vides otherwise). See, e.g., NationsBank, 513 U. S., at 256–251. Se
curity against significant interference by state regulators is a charac
teristic condition of “the business of banking” conducted by national
banks, and mortgage lending is one aspect of that business. See, e.g.,
12 U. S. C. §484(a). That security should adhere whether the busi
ness is conducted by the bank itself or by an OCC-licensed operating
subsidiary whose authority to carry on the business coincides com
pletely with the bank’s.
Watters contends that if Congress meant to deny States visitorial
powers over operating subsidiaries, it would have written §484(a)’s
ban on state inspection to apply not only to national banks but also to
their affiliates. She points out that §481, which authorizes OCC to
examine “affiliates” of national banks, does not speak to state visito
rial powers. This argument fails for two reasons. First, any inten
tion regarding operating subsidiaries cannot be ascribed to the 1864
Congress that enacted §§481 and 484, or the 1933 Congress that
added the affiliate examination provisions to §481 and the “affiliate”
definition to §221a, because operating subsidiaries were not author
ized until 1966. Second, Watters ignores the distinctions Congress
recognized among “affiliates.” Unlike affiliates that may engage in
functions not authorized by the NBA, an operating subsidiary is
tightly tied to its parent by the specification that it may engage only
in “the business of banking,” §24a(g)(3)(A). Notably, when Congress
amended the NBA to provide that operating subsidiaries may “en
gag[e] solely in activities that national banks are permitted to engage
in directly,” ibid., it did so in an Act providing that other affiliates,
authorized to engage in nonbanking financial activities, e.g., securi
4 WATTERS v. WACHOVIA BANK, N. A.
Syllabus
ties and insurance, are subject to state regulation in connection with
those activities. See, e.g., §§1843(k), 1844(c)(4). Pp. 10–15.
(c) Recognizing the necessary consequence of national banks’ au
thority to engage in mortgage lending through an operating subsidi
ary “subject to the same terms and conditions that govern the con
duct of such activities by national banks,” §24a(g)(3)(A), OCC
promulgated 12 CFR §7.4006: “Unless otherwise provided by Federal
law or OCC regulation, State laws apply to national bank operating
subsidiaries to the same extent that those laws apply to the parent
national bank.” Watters disputes OCC’s authority to promulgate this
regulation and contends that, because preemption is a legal question
for determination by courts, §7.4006 should attract no deference.
This argument is beside the point, for §7.4006 merely clarifies and
confirms what the NBA already conveys: A national bank may en
gage in real estate lending through an operating subsidiary, subject
to the same terms and conditions that govern the bank itself; that
power cannot be significantly impaired or impeded by state law.
Though state law governs incorporation-related issues, state regula
tors cannot interfere with the “business of banking” by subjecting na
tional banks or their OCC-licensed operating subsidiaries to multiple
audits and surveillance under rival oversight regimes. Pp. 15–17.
2. Watters’ alternative argument, that 12 CFR §7.4006 violates the
Tenth Amendment, is unavailing. The Amendment expressly dis
claims any reservation to the States of a power delegated to Congress
in the Constitution, New York v. United States, 505 U. S. 144, 156.
Because regulation of national bank operations is Congress’ preroga
tive under the Commerce and Necessary and Proper Clauses, see
Citizens Bank v. Alafabco, Inc., 539 U. S. 52, 58, the Amendment is
not implicated here. P. 17.
431 F. 3d 556, affirmed.
GINSBURG, J., delivered the opinion of the Court, in which KENNEDY,
SOUTER, BREYER, and ALITO, JJ., joined. STEVENS, J., filed a dissenting
opinion, in which ROBERTS, C. J., and SCALIA, J., joined. THOMAS, J.,
took no part in the consideration or decision of the case.
Cite as: 550 U. S. ____ (2007) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 05–1342
_________________
LINDA A. WATTERS, COMMISSIONER, MICHIGAN
OFFICE OF INSURANCE AND FINANCIAL
SERVICES, PETITIONER v. WACHOVIA
BANK, N. A., ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SIXTH CIRCUIT
[April 17, 2007]
JUSTICE GINSBURG delivered the opinion of the Court.
Business activities of national banks are controlled by
the National Bank Act (NBA or Act), 12 U. S. C. §1 et seq.,
and regulations promulgated thereunder by the Office of
the Comptroller of the Currency (OCC). See §§24, 93a,
371(a). As the agency charged by Congress with supervi
sion of the NBA, OCC oversees the operations of national
banks and their interactions with customers. See
NationsBank of N. C., N. A. v. Variable Annuity Life Ins.
Co., 513 U. S. 251, 254, 256 (1995). The agency exercises
visitorial powers, including the authority to audit the
bank’s books and records, largely to the exclusion of other
governmental entities, state or federal. See §484(a); 12
CFR §7.4000 (2006).
The NBA specifically authorizes federally chartered
banks to engage in real estate lending. 12 U. S. C. §371.
It also provides that banks shall have power “[t]o exercise
. . . all such incidental powers as shall be necessary to
carry on the business of banking.” §24 Seventh. Among
2 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
incidental powers, national banks may conduct certain
activities through “operating subsidiaries,” discrete enti
ties authorized to engage solely in activities the bank itself
could undertake, and subject to the same terms and condi
tions as those applicable to the bank. See §24a(g)(3)(A);
12 CFR §5.34(e) (2006).
Respondent Wachovia Bank, a national bank, conducts
its real estate lending business through Wachovia Mort
gage Corporation, a wholly owned, state-chartered entity,
licensed as an operating subsidiary by OCC. It is uncon
tested in this suit that Wachovia’s real estate business, if
conducted by the national bank itself, would be subject to
OCC’s superintendence, to the exclusion of state registra
tion requirements and visitorial authority. The question
in dispute is whether the bank’s mortgage lending activi
ties remain outside the governance of state licensing and
auditing agencies when those activities are conducted, not
by a division or department of the bank, but by the bank’s
operating subsidiary. In accord with the Courts of Ap
peals that have addressed the issue,1 we hold that Wacho
via’s mortgage business, whether conducted by the bank
itself or through the bank’s operating subsidiary, is sub
ject to OCC’s superintendence, and not to the licensing,
reporting, and visitorial regimes of the several States in
which the subsidiary operates.
I
Wachovia Bank is a national banking association char
tered by OCC. Respondent Wachovia Mortgage is a North
Carolina corporation that engages in the business of real
estate lending in the State of Michigan and elsewhere.
Michigan’s statutory regime exempts banks, both national
——————
1 National
City Bank of Indiana v. Turnbaugh, 463 F. 3d 325 (CA4
2006); Wachovia Bank, N. A. v. Burke, 414 F. 3d 305 (CA2 2005); 431
F. 3d 556 (CA6 2005) (case below); Wells Fargo Bank N. A. v. Boutris,
419 F. 3d 949 (CA9 2005).
Cite as: 550 U. S. ____ (2007) 3
Opinion of the Court
and state, from state mortgage lending regulation, but
requires mortgage brokers, lenders, and servicers that are
subsidiaries of national banks to register with the State’s
Office of Insurance and Financial Services (OIFS) and
submit to state supervision. Mich. Comp. Laws Ann.
§§445.1656(1), 445.1679(1)(a) (West 2002), 493.52(1), and
493.53a(d) (West 1998).2 From 1997 until 2003, Wachovia
Mortgage was registered with OIFS to engage in mortgage
lending. As a registrant, Wachovia Mortgage was re
quired, inter alia, to pay an annual operating fee, file an
annual report, and open its books and records to inspec
tion by OIFS examiners. §§445.1657, 445.1658, 445.1671
(West 2002), 493.54, 493.56a(2), (13) (West 1998).
Petitioner Linda Watters, the commissioner of OIFS,
administers the State’s lending laws. She exercises “gen
eral supervision and control” over registered lenders, and
has authority to conduct examinations and investigations
and to enforce requirements against registrants. See
§§445.1661, 445.1665, 445.1666 (West 2002), 493.58,
493.56b, 493.59, 493.62a (West 1998 and Supp. 2005). She
also has authority to investigate consumer complaints and
take enforcement action if she finds that a complaint is
not “being adequately pursued by the appropriate federal
regulatory authority.” §445.1663(2) (West 2002).
On January 1, 2003, Wachovia Mortgage became a
wholly owned operating subsidiary of Wachovia Bank.
Three months later, Wachovia Mortgage advised the State
of Michigan that it was surrendering its mortgage lending
registration. Because it had become an operating subsidi
ary of a national bank, Wachovia Mortgage maintained,
Michigan’s registration and inspection requirements were
——————
2 Michigan’s law exempts subsidiaries of national banks that main
tain a main office or branch office in Michigan. Mich. Comp. Laws Ann.
§§445.1652(1)(b) (West Supp. 2006), 445.1675(m) (West 2002),
493.53a(d) (West 1998). Wachovia Bank has no such office in Michigan.
4 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
preempted. Watters responded with a letter advising
Wachovia Mortgage that it would no longer be authorized
to conduct mortgage lending activities in Michigan.
Wachovia Mortgage and Wachovia Bank filed suit
against Watters, in her official capacity as commissioner,
in the United States District Court for the Western Dis
trict of Michigan. They sought declaratory and injunctive
relief prohibiting Watters from enforcing Michigan’s regis
tration prescriptions against Wachovia Mortgage, and
from interfering with OCC’s exclusive visitorial authority.
The NBA and regulations promulgated thereunder, they
urged, vest supervisory authority in OCC and preempt the
application of the state-law controls at issue. Specifically,
Wachovia Mortgage and Wachovia Bank challenged as
preempted certain provisions of two Michigan statutes—
the Mortgage Brokers, Lenders, and Services Licensing
Act and the Secondary Mortgage Loan Act. The chal
lenged provisions (1) require mortgage lenders—including
national bank operating subsidiaries but not national
banks themselves—to register and pay fees to the State
before they may conduct banking activities in Michigan,
and authorize the commissioner to deny or revoke regis
trations, §§445.1652(1) (West Supp. 2006), 445.1656(1)(d)
(West 2002), 445.1657(1), 445.1658, 445.1679(1)(a),
493.52(1) (West 1998), 493.53a(d), 493.54, 493.55(4),
493.56a(2), and 493.61; (2) require submission of annual
financial statements to the commissioner and retention of
certain documents in a particular format, §§445.1657(2)
(West 2002), 445.1671, 493.56a(2) (West 1998); (3) grant
the commissioner inspection and enforcement authority
over registrants, §§445.1661 (West 2002), 493.56b (West
Supp. 2005); and (4) authorize the commissioner to take
regulatory or enforcement actions against covered lenders,
§§445.1665 (West 2002), 445.1666, 493.58–59, and 493.62a
(West 1998).
In response, Watters argued that, because Wachovia
Cite as: 550 U. S. ____ (2007) 5
Opinion of the Court
Mortgage was not itself a national bank, the challenged
Michigan controls were applicable and were not pre
empted. She also contended that the Tenth Amendment
to the Constitution of the United States prohibits OCC’s
exclusive superintendence of national bank lending activi
ties conducted through operating subsidiaries.
The District Court granted summary judgment to the
banks in relevant part. 334 F. Supp. 2d 957, 966 (WD
Mich. 2004). Invoking the two-step framework of Chevron
U. S. A. Inc. v. Natural Resources Defense Council, Inc.,
467 U. S. 837 (1984), the court deferred to the Comptrol
ler’s determination that an operating subsidiary is subject
to state regulation only to the extent that the parent bank
would be if it performed the same functions. 334 F. Supp.
2d, at 963–965 (citing, e.g., 12 CFR §§5.34(e)(3), 7.4006
(2004)). The court also rejected Watters’ Tenth Amend
ment argument. 334 F. Supp. 2d, at 965–966. The Sixth
Circuit affirmed. 431 F. 3d 556 (2005). We granted certio
rari. 547 U. S. ___ (2006).
II
A
Nearly two hundred years ago, in McCulloch v. Mary
land, 4 Wheat. 316 (1819), this Court held federal law
supreme over state law with respect to national banking.
Though the bank at issue in McCulloch was short-lived, a
federal banking system reemerged in the Civil War era.
See Atherton v. FDIC, 519 U. S. 213, 221–222 (1997); B.
Hammond, Banks and Politics in America: from the Revo
lution to the Civil War (1957). In 1864, Congress enacted
the NBA, establishing the system of national banking still
in place today. National Bank Act, ch. 106, 13 Stat. 99;3
Atherton, 519 U. S., at 222; Marquette Nat. Bank of Min
——————
3 The Act of June 3, 1864, ch. 106, 13 Stat. 99, was originally entitled
“An Act to provide a National Currency . . .”; its title was altered by
Congress in 1874 to “the National Bank Act.” Ch. 343, 18 Stat. 123.
6 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
neapolis v. First of Omaha Service Corp., 439 U. S. 299,
310, 314–315 (1978). The Act vested in nationally char
tered banks enumerated powers and “all such incidental
powers as shall be necessary to carry on the business of
banking.” 12 U. S. C. §24 Seventh. To prevent inconsis
tent or intrusive state regulation from impairing the
national system, Congress provided: “No national bank
shall be subject to any visitorial powers except as author
ized by Federal law . . . .” §484(a).
In the years since the NBA’s enactment, we have re
peatedly made clear that federal control shields national
banking from unduly burdensome and duplicative state
regulation. See, e.g., Beneficial Nat. Bank v. Anderson,
539 U. S. 1, 10 (2003) (national banking system protected
from “possible unfriendly State legislation” (quoting Tif
fany v. National Bank of Mo., 18 Wall. 409, 412 (1874))).
Federally chartered banks are subject to state laws of
general application in their daily business to the extent
such laws do not conflict with the letter or the general
purposes of the NBA. Davis v. Elmira Savings Bank, 161
U. S. 275, 290 (1896). See also Atherton, 519 U. S., at 223.
For example, state usury laws govern the maximum rate
of interest national banks can charge on loans, 12 U. S. C.
§85, contracts made by national banks “are governed and
construed by State laws,” National Bank v. Common
wealth, 9 Wall. 353, 362 (1870), and national banks’ “ac
quisition and transfer of property [are] based on State
law,” ibid. However, “the States can exercise no control
over [national banks], nor in any wise affect their opera
tion, except in so far as Congress may see proper to per
mit. Any thing beyond this is an abuse, because it is the
usurpation of power which a single State cannot give.”
Farmers’ and Mechanics’ Nat. Bank v. Dearing, 91 U. S.
29, 34 (1875) (internal quotation marks omitted).
We have “interpret[ed] grants of both enumerated and
incidental ‘powers’ to national banks as grants of author
Cite as: 550 U. S. ____ (2007) 7
Opinion of the Court
ity not normally limited by, but rather ordinarily pre
empting, contrary state law.” Barnett Bank of Marion
Cty., N. A. v. Nelson, 517 U. S. 25, 32 (1996). See also
Franklin Nat. Bank of Franklin Square v. New York, 347
U. S. 373, 375–379 (1954). States are permitted to regu
late the activities of national banks where doing so does
not prevent or significantly interfere with the national
bank’s or the national bank regulator’s exercise of its
powers. But when state prescriptions significantly impair
the exercise of authority, enumerated or incidental under
the NBA, the State’s regulations must give way. Barnett
Bank, 517 U. S., at 32–34 (federal law permitting national
banks to sell insurance in small towns preempted state
statute prohibiting banks from selling most types of insur
ance); Franklin Nat. Bank, 347 U. S., at 377–379 (local
restrictions preempted because they burdened exercise of
national banks’ incidental power to advertise).
The NBA authorizes national banks to engage in
mortgage lending, subject to OCC regulation. The Act
provides:
“Any national banking association may make, ar
range, purchase or sell loans or extensions of credit
secured by liens on interests in real estate, subject to
1828(o) of this title and such restrictions and re
quirements as the Comptroller of the Currency may
prescribe by regulation or order.” 12 U. S. C. §371(a).4
Beyond genuine dispute, state law may not significantly
burden a national bank’s own exercise of its real estate
——————
4 Section1828(o) requires federal banking agencies to adopt uniform
regulations prescribing standards for real estate lending by depository
institutions and sets forth criteria governing such standards. See, e.g.,
§1828(o)(2)(A) (“In prescribing standards . . . the agencies shall con
sider—(i) the risk posed to the deposit insurance funds by such exten
sions of credit; (ii) the need for safe and sound operation of insured
depository institutions; and (iii) the availability of credit.”).
8 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
lending power, just as it may not curtail or hinder a na
tional bank’s efficient exercise of any other power, inciden
tal or enumerated under the NBA. See Barnett Bank, 517
U. S., at 33–34; Franklin, 347 U. S., at 375–379. See also
12 CFR §34.4(a)(1) (2006) (identifying preempted state
controls on mortgage lending, including licensing and
registration). In particular, real estate lending, when
conducted by a national bank, is immune from state visi
torial control: The NBA specifically vests exclusive author
ity to examine and inspect in OCC. 12 U. S. C. §484(a)
(“No national bank shall be subject to any visitorial pow
ers except as authorized by Federal law.”).5
Harmoniously, the Michigan provisions at issue exempt
national banks from coverage. Mich. Comp. Laws Ann.
§445.1675(a) (West 2002). This is not simply a matter of
the Michigan Legislature’s grace. Cf. post, at 13–14, and
n. 17. For, as the parties recognize, the NBA would have
preemptive force, i.e., it would spare a national bank from
state controls of the kind here involved. See Brief for
Petitioner 12; Brief for Respondents 14; Brief for United
States as Amicus Curiae 9. State laws that conditioned
national banks’ real estate lending on registration with
the State, and subjected such lending to the State’s inves
tigative and enforcement machinery would surely inter
fere with the banks’ federally authorized business: Na
tional banks would be subject to registration, inspection,
and enforcement regimes imposed not just by Michigan,
but by all States in which the banks operate.6 Diverse and
——————
5 Seealso 2 R. Taylor, Banking Law §37.02, p. 37–5 (2006) (“[OCC]
has exclusive authority to charter and examine [national] banks.”
(footnote omitted)).
6 See 69 Fed. Reg. 1908 (2004) (“The application of multiple, often
unpredictable, different state or local restrictions and requirements
prevents [national banks] from operating in the manner authorized
under Federal law, is costly and burdensome, interferes with their
ability to plan their business and manage their risks, and subjects
Cite as: 550 U. S. ____ (2007) 9
Opinion of the Court
duplicative superintendence of national banks’ engage
ment in the business of banking, we observed over a cen
tury ago, is precisely what the NBA was designed to pre
vent: “Th[e] legislation has in view the erection of a
system extending throughout the country, and independ
ent, so far as powers conferred are concerned, of state
legislation which, if permitted to be applicable, might
impose limitations and restrictions as various and as
numerous as the States.” Easton v. Iowa, 188 U. S. 220,
229 (1903). Congress did not intend, we explained, “to
leave the field open for the States to attempt to promote
the welfare and stability of national banks by direct legis
lation. . . . [C]onfusion would necessarily result from con
trol possessed and exercised by two independent authori
ties.” Id., at 231–232.
Recognizing the burdens and undue duplication state
controls could produce, Congress included in the NBA an
express command: “No national bank shall be subject to
any visitorial powers except as authorized by Federal
law. . . .” 12 U. S. C. §484(a). See supra, at 6, 8; post, at
10 (acknowledging that national banks have been “ex
emp[t] from state visitorial authority . . . for more than
140 years”). “Visitation,” we have explained “is the act of
a superior or superintending officer, who visits a corpora
tion to examine into its manner of conducting business,
and enforce an observance of its laws and regulations.”
Guthrie v. Harkness, 199 U. S. 148, 158 (1905) (internal
quotation marks omitted). See also 12 CFR §7.4000(a)(2)
(2006) (defining “visitorial” power as “(i) [e]xamination of a
bank; (ii) [i]nspection of a bank’s books and records; (iii)
[r]egulation and supervision of activities authorized or
permitted pursuant to federal banking law; and (iv)
[e]nforcing compliance with any applicable federal or state
laws concerning those activities”). Michigan, therefore,
——————
them to uncertain liabilities and potential exposure.”).
10 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
cannot confer on its commissioner examination and en
forcement authority over mortgage lending, or any other
banking business done by national banks.7
B
While conceding that Michigan’s licensing, registration,
and inspection requirements cannot be applied to national
banks, see, e.g., Brief for Petitioner 10, 12, Watters argues
that the State’s regulatory regime survives preemption
with respect to national banks’ operating subsidiaries.
Because such subsidiaries are separately chartered under
some State’s law, Watters characterizes them simply as
“affiliates” of national banks, and contends that even
though they are subject to OCC’s superintendence, they
——————
7 Ours is indeed a “dual banking system.” See post, at 1–5, 23. But it
is a system that has never permitted States to license, inspect, and
supervise national banks as they do state banks. The dissent repeat
edly refers to the policy of “competitive equality” featured in First Nat.
Bank in Plant City v. Dickinson, 396 U. S. 122, 131 (1969). See post, at
4, 14, 19, 23. Those words, however, should not be ripped from their
context. Plant City involved the McFadden Act (Branch Banks), 44
Stat. 1228, 12 U. S. C. §36, in which Congress expressly authorized
national banks to establish branches “only when, where, and how state
law would authorize a state bank to establish and operate such
[branches].” 396 U. S., at 130. See also id., at 131 (“[W]hile Congress
has absolute authority over national banks, the [McFadden Act] has
incorporated by reference the limitations which state law places on
branch banking activities by state banks. Congress has deliberately
settled upon a policy intended to foster competitive equality. . . . [The]
Act reflects the congressional concern that neither system ha[s] advan
tages over the other in the use of branch banking.” (quoting First Nat.
Bank of Logan v. Walker Bank & Trust Co., 385 U. S. 252, 261 (1966))).
“[W]here Congress has not expressly conditioned the grant of ‘power’
upon a grant of state permission, the Court has ordinarily found that
no such condition applies.” Barnett Bank of Marion Cty., N. A. v.
Nelson, 517 U. S. 25, 34 (1996). The NBA provisions before us, unlike
the McFadden Act, do not condition the exercise of power by national
banks on state allowance of similar exercises by state banks. See
supra, at 7–8.
Cite as: 550 U. S. ____ (2007) 11
Opinion of the Court
are also subject to multistate control. Id., at 17–22. We
disagree.
Since 1966, OCC has recognized the “incidental” author
ity of national banks under §24 Seventh to do business
through operating subsidiaries. See 31 Fed. Reg. 11459–
11460 (1966); 12 CFR §5.34(e)(1) (2006) (“A national bank
may conduct in an operating subsidiary activities that are
permissible for a national bank to engage in directly either
as part of, or incidental to, the business of banking . . . .”).
That authority is uncontested by Michigan’s commis
sioner. See Brief for Petitioner 21 (“[N]o one disputes that
12 U. S. C. §24 (Seventh) authorizes national banks to use
nonbank operating subsidiaries . . . .”). OCC licenses and
oversees national bank operating subsidiaries just as it
does national banks. §5.34(e)(3) (“An operating subsidiary
conducts activities authorized under this section pursuant
to the same authorization, terms and conditions that apply
to the conduct of such activities by its parent national
bank.”);8 United States Office of the Comptroller of the
Currency, Related Organizations: Comptroller’s Handbook
53 (Aug. 2004) (hereinafter Comptroller’s Handbook)
(“Operating subsidiaries are subject to the same supervi
sion and regulation as the parent bank, except where
otherwise provided by law or OCC regulation.”).
In 1999, Congress defined and regulated “financial”
subsidiaries; simultaneously, Congress distinguished
those national bank affiliates from subsidiaries—typed
“operating subsidiaries” by OCC—which may engage only
——————
8 The regulation further provides:
“If, upon examination, the OCC determines that the operating subsidi
ary is operating in violation of law, regulation, or written condition, or
in an unsafe or unsound manner or otherwise threatens the safety or
soundness of the bank, the OCC will direct the bank or operating
subsidiary to take appropriate remedial action, which may include
requiring the bank to divest or liquidate the operating subsidiary, or
discontinue specified activities.” 12 CFR §5.34(e)(3) (2006).
12 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
in activities national banks may engage in directly, “sub
ject to the same terms and conditions that govern the
conduct of such activities by national banks.” Gramm-
Leach-Bliley Act (GLBA), §121(a)(2), 113 Stat. 1378 (codi
fied at 12 U. S. C. §24a(g)(3)(A)).9 For supervisory pur
poses, OCC treats national banks and their operating
subsidiaries as a single economic enterprise. Comptrol
ler’s Handbook 64. OCC oversees both entities by refer
ence to “business line,” applying the same controls
whether banking “activities are conducted directly or
through an operating subsidiary.” Ibid.10
As earlier noted, Watters does not contest the authority
of national banks to do business through operating sub
sidiaries. Nor does she dispute OCC’s authority to super
——————
9 OCC subsequently revised its regulations to track the statute. See
§5.34(e)(1), (3); Financial Subsidiaries and Operating Subsidiaries, 65
Fed. Reg. 12905, 12911 (2000). Cf. post, at 10 (dissent’s grudging
acknowledgment that Congress “may have acquiesced” in OCC’s
position that national banks may engage in “the business of banking”
through operating subsidiaries empowered to do only what the bank
itself can do).
10 For example, “for purposes of applying statutory or regulatory lim
its, such as lending limits or dividend restrictions,” e.g., 12 U. S. C.
§§56, 60, 84, 371d, “[t]he results of operations of operating subsidiaries
are consolidated with those of its parent.” Comptroller’s Handbook 64.
Likewise, for accounting and regulatory reporting purposes, an operat
ing subsidiary is treated as part of the member bank; assets and
liabilities of the two entities are combined. See 12 CFR §§5.34(e)(4)(i),
223.3(w) (2006). OCC treats financial subsidiaries differently. A
national bank may not consolidate the assets and liabilities of a finan
cial subsidiary with those of the bank. Comptroller’s Handbook 64. It
cannot be fairly maintained “that the transfer in 2003 of [Wachovia
Mortgage’s] ownership from the holding company to the Bank” resulted
in no relevant changes to the company’s business. Compare post, at 14,
with supra, at 11, n. 8. On becoming Wachovia’s operating subsidiary,
Wachovia Mortgage became subject to the same terms and conditions
as national banks, including the full supervisory authority of OCC.
This change exposed the company to significantly more federal over
sight than it experienced as a state nondepository institution.
Cite as: 550 U. S. ____ (2007) 13
Opinion of the Court
vise and regulate operating subsidiaries in the same man
ner as national banks. Still, Watters seeks to impose state
regulation on operating subsidiaries over and above regu
lation undertaken by OCC. But just as duplicative state
examination, supervision, and regulation would signifi
cantly burden mortgage lending when engaged in by
national banks, see supra, at 6–10, so too would those
state controls interfere with that same activity when
engaged in by an operating subsidiary.
We have never held that the preemptive reach of the
NBA extends only to a national bank itself. Rather, in
analyzing whether state law hampers the federally per
mitted activities of a national bank, we have focused on
the exercise of a national bank’s powers, not on its corpo
rate structure. See, e.g., Barnett Bank, 517 U. S., at 32.
And we have treated operating subsidiaries as equivalent
to national banks with respect to powers exercised under
federal law (except where federal law provides otherwise).
In NationsBank of N. C., N. A., 513 U. S., at 256–261, for
example, we upheld OCC’s determination that national
banks had “incidental” authority to act as agents in the
sale of annuities. It was not material that the function
qualifying as within “the business of banking,” §24 Sev
enth, was to be carried out not by the bank itself, but by
an operating subsidiary, i.e., an entity “subject to the same
terms and conditions that govern the conduct of [the activ
ity] by national banks [themselves].” §24a(g)(3)(A); 12
CFR §5.34(e)(3) (2006). See also Clarke v. Securities In
dustry Assn., 479 U. S. 388 (1987) (national banks, acting
through operating subsidiaries, have power to offer dis
count brokerage services).11
——————
11 Cf. Marquette Nat. Bank of Minneapolis v. First of Omaha Service
Corp., 439 U. S. 299, 308, and n. 24 (1978) (holding that national bank
may charge home State’s interest rate, regardless of more restrictive
usury laws in borrower’s State, but declining to consider operating
subsidiaries).
14 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
Security against significant interference by state regula
tors is a characteristic condition of the “business of bank
ing” conducted by national banks, and mortgage lending is
one aspect of that business. See, e.g., 12 U. S C. §484(a);
12 CFR §34.4(a)(1) (2006). See also supra, at 6–10; post,
at 6 (acknowledging that, in 1982, Congress broadly au
thorized national banks to engage in mortgage lending);
post, at 16, and n. 20 (acknowledging that operating sub
sidiaries “are subject to the same federal oversight as their
national bank parents”). That security should adhere
whether the business is conducted by the bank itself or is
assigned to an operating subsidiary licensed by OCC
whose authority to carry on the business coincides com
pletely with that of the bank. See Wells Fargo Bank, N. A.
v. Boutris, 419 F. 3d 949, 960 (CA9 2005) (determination
whether to conduct business through operating subsidiar
ies or through subdivisions is “essentially one of internal
organization”).
Watters contends that if Congress meant to deny States
visitorial powers over operating subsidiaries, it would
have written §484(a)’s ban on state inspection to apply not
only to national banks but also to their affiliates. She
points out that §481, which authorizes OCC to examine
“affiliates” of national banks, does not speak to state
visitorial powers. This argument fails for two reasons.
First, one cannot ascribe any intention regarding operat
ing subsidiaries to the 1864 Congress that enacted §§481
and 484, or the 1933 Congress that added the provisions
on examining affiliates to §481 and the definition of “af
filiate” to §221a. That is so because operating subsidiaries
were not authorized until 1966. See supra, at 11. Over
the past four decades, during which operating subsidiaries
have emerged as important instrumentalities of national
banks, Congress and OCC have indicated no doubt that
such subsidiaries are “subject to the same terms and
conditions” as national banks themselves.
Cite as: 550 U. S. ____ (2007) 15
Opinion of the Court
Second, Watters ignores the distinctions Congress rec
ognized among “affiliates.” The NBA broadly defines the
term “affiliate” to include “any corporation” controlled by a
national bank, including a subsidiary. See 12 U. S. C.
§221a(b). An operating subsidiary is therefore one type of
“affiliate.” But unlike affiliates that may engage in func
tions not authorized by the NBA, e.g., financial subsidiar
ies, an operating subsidiary is tightly tied to its parent by
the specification that it may engage only in “the business
of banking” as authorized by the Act. §24a(g)(3)(A); 12
CFR §5.34(e)(1) (2006). See also supra, at 11–12, and
n. 10. Notably, when Congress amended the NBA con
firming that operating subsidiaries may “engag[e] solely in
activities that national banks are permitted to engage in
directly,” 12 U. S. C. §24a(g)(3)(A), it did so in an Act, the
GLBA, providing that other affiliates, authorized to en
gage in nonbanking financial activities, e.g., securities and
insurance, are subject to state regulation in connection
with those activities. See, e.g., §§1843(k), 1844(c)(4). See
also 15 U. S. C. §6701(b) (any person who sells insurance
must obtain a state license to do so).12
C
Recognizing the necessary consequence of national
banks’ authority to engage in mortgage lending through
an operating subsidiary “subject to the same terms and
conditions that govern the conduct of such activities by
national banks,” 12 U. S. C. §24a(g)(3)(A), see also §24
Seventh, OCC promulgated 12 CFR §7.4006 (2006):
“Unless otherwise provided by Federal law or OCC regula
——————
12 The dissent protests that the GLBA does not itself preempt the
Michigan provisions at issue. Cf. post, at 15–17. We express no opinion
on that matter. Our point is more modest: The GLBA simply demon
strates Congress’ formal recognition that national banks have inciden
tal power to do business through operating subsidiaries. See supra, at
11–12; cf. post, at 9–10.
16 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
tion, State laws apply to national bank operating subsidi
aries to the same extent that those laws apply to the
parent national bank.” See Investment Securities; Bank
Activities & Operations; Leasing, 66 Fed. Reg. 34784,
34788 (2001). Watters disputes the authority of OCC to
promulgate this regulation and contends that, because
preemption is a legal question for determination by courts,
§7.4006 should attract no deference. See also post, at 17–
23. This argument is beside the point, for under our in
terpretation of the statute, the level of deference owed to
the regulation is an academic question. Section 7.4006
merely clarifies and confirms what the NBA already con
veys: A national bank has the power to engage in real
estate lending through an operating subsidiary, subject to
the same terms and conditions that govern the national
bank itself; that power cannot be significantly impaired or
impeded by state law. See, e.g., Barnett Bank, 517 U. S.,
at 33–34; 12 U. S. C. §§24 Seventh, 24a(g)(3)(A), 371.13
The NBA is thus properly read by OCC to protect from
state hindrance a national bank’s engagement in the
“business of banking” whether conducted by the bank
itself or by an operating subsidiary, empowered to do only
what the bank itself could do. See supra, at 11–12. The
authority to engage in the business of mortgage lending
comes from the NBA, §371, as does the authority to con
duct business through an operating subsidiary. See §§24
Seventh, 24a(g)(3)(A). That Act vests visitorial oversight
——————
13 Because we hold that the NBA itself—independent of OCC’s regu
lation—preempts the application of the pertinent Michigan laws to
national bank operating subsidiaries, we need not consider the dissent’s
lengthy discourse on the dangers of vesting preemptive authority in
administrative agencies. See post, at 17–23; cf. post, at 23–24 (main
taining that “[w]hatever the Court says, this is a case about an admin
istrative agency’s power to preempt state laws,” and accusing the Court
of “endors[ing] administrative action whose sole purpose was to pre
empt state law rather than to implement a statutory command”).
Cite as: 550 U. S. ____ (2007) 17
Opinion of the Court
in OCC, not state regulators. §484(a). State law (in this
case, North Carolina law), all agree, governs incorpora
tion-related issues, such as the formation, dissolution, and
internal governance of operating subsidiaries.14 And the
laws of the States in which national banks or their affili
ates are located govern matters the NBA does not address.
See supra, at 6. But state regulators cannot interfere with
the “business of banking” by subjecting national banks or
their OCC-licensed operating subsidiaries to multiple
audits and surveillance under rival oversight regimes.
III
Watters’ alternative argument, that 12 CFR §7.4006
violates the Tenth Amendment to the Constitution, is
unavailing. As we have previously explained, “[i]f a power
is delegated to Congress in the Constitution, the Tenth
Amendment expressly disclaims any reservation of that
power to the States.” New York v. United States, 505 U. S.
144, 156 (1992). Regulation of national bank operations is
a prerogative of Congress under the Commerce and Neces
sary and Proper Clauses. See Citizens Bank v. Alafabco,
Inc., 539 U. S. 52, 58 (2003) (per curiam). The Tenth
Amendment, therefore, is not implicated here.
* * *
For the reasons stated, the judgment of the Sixth Cir
cuit is
Affirmed.
JUSTICE THOMAS took no part in the consideration or
decision of this case.
——————
14 Watters does not assert that Wachovia Mortgage is out of compli
ance with any North Carolina law governing its corporate status.
Cite as: 550 U. S. ____ (2007) 1
STEVENS, J., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
No. 05–1342
_________________
LINDA A. WATTERS, COMMISSIONER, MICHIGAN
OFFICE OF INSURANCE AND FINANCIAL
SERVICES, PETITIONER v. WACHOVIA
BANK, N. A., ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SIXTH CIRCUIT
[April 17, 2007]
JUSTICE STEVENS, with whom THE CHIEF JUSTICE and
JUSTICE SCALIA join, dissenting.
Congress has enacted no legislation immunizing na
tional bank subsidiaries from compliance with non
discriminatory state laws regulating the business activi
ties of mortgage brokers and lenders. Nor has it
authorized an executive agency to preempt such state laws
whenever it concludes that they interfere with national
bank activities. Notwithstanding the absence of relevant
statutory authority, today the Court endorses an agency’s
incorrect determination that the laws of a sovereign State
must yield to federal power. The significant impact of the
Court’s decision on the federal-state balance and the dual
banking system makes it appropriate to set forth in full
the reasons for my dissent.
I
The National Bank Act (or NBA), 13 Stat. 99, author
ized the incorporation of national banks, §5, id., at 98, and
granted them “all such incidental powers as shall be nec
essary to carry on the business of banking,” §8, id., at 98
(codified at 12 U. S. C. §24 Seventh), subject to regulatory
oversight by the Comptroller of the Currency, §54, 13 Stat.
2 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
116. To maintain a meaningful role for state legislation
and for state corporations that did not engage in core
banking activities, Congress circumscribed national bank
authority. Notably, national banks were expressly forbid
den from making mortgage loans, §28, id., at 108.1 More
over, the shares of national banks, as well their real estate
holdings, were subject to nondiscriminatory state taxation,
§41, id., at 111; and while national banks could lend
money, state law capped the interest rates they could
charge, §20, id., at 105.
Originally, it was anticipated that “existing banks
would surrender their state charters and re-incorporate
under the terms of the new law with national charters.”2
That did not happen. Instead, after an initial post-
National Bank Act decline, state-chartered institutions
thrived.3 What emerged was the competitive mix of state
and national banks known as the dual banking system.
This Court has consistently recognized that because
federal law is generally interstitial, national banks must
comply with most of the same rules as their state counter
parts. As early as 1870, we articulated the principle that
has remained the lodestar of our jurisprudence: that na
tional banks
“are only exempted from State legislation, so far as
that legislation may interfere with, or impair their ef
——————
1 “There is no more characteristic difference between the state and
the national banking laws than the fact that almost without exception,
state banks may loan on real estate security, while national banks are
prohibited from doing so.” G. Barnett, State Banking in the United
States Since the Passage of the National Bank Act 50 (1902) (reprint
1983) (hereinafter Barnett).
2 B. Hammond, Banks and Politics in America: from the Revolution to
the Civil War 728 (1957).
3 Id., at 733. See also Barnett 73–74 (estimating that more than 800
state banks were in operation in 1877, and noting the “remarkable
increase in the number of state banks” during the last two decades of
the 19th century).
Cite as: 550 U. S. ____ (2007) 3
STEVENS, J., dissenting
ficiency in performing the functions by which they are
designed to serve that government. . . . They are sub
ject to the laws of the State, and are governed in their
daily course of business far more by the laws of the
State than of the nation. All their contracts are gov
erned and construed by State laws. Their acquisition
and transfer of property, their right to collect their
debts, and their liability to be sued for debts, are all
based on State law. It is only when the State law in
capacitates the banks from discharging their duties to
the government that it becomes unconstitutional.” Na
tional Bank v. Commonwealth, 9 Wall. 353, 362 (1870)
(emphasis added).4
Until today, we have remained faithful to the principle
that nondiscriminatory laws of general application that do
not “forbid” or “impair significantly” national bank activi
ties should not be preempted. See, e.g., Barnett Bank of
Marion Cty., N. A. v. Nelson, 517 U. S. 25, 33 (1996).5
Nor is the Court alone in recognizing the vital role that
state legislation plays in the dual banking system. Al
——————
4 See also McClellan v. Chipman, 164 U. S. 347, 357 (1896) (explain
ing that our cases establish “a rule and an exception, the rule being the
operation of general state laws upon the dealings and contracts of
national banks, the exception being the cessation of the operation of
such laws whenever they expressly conflict with the laws of the United
States or frustrate the purpose for which the national banks were
created, or impair their efficiency to discharge the duties imposed upon
them by the law of the United States”).
5 See also Anderson Nat. Bank v. Luckett, 321 U. S. 233, 248 (1944)
(“This Court has often pointed out that national banks are subject to
state laws, unless those laws infringe the national banking laws or
impose an undue burden on the performance of the banks’ functions”);
Davis v. Elmira Savings Bank, 161 U. S. 275, 290 (1896) (“Nothing, of
course, in this opinion is intended to deny the operation of general and
undiscriminating state laws on the contracts of national banks, so long
as such laws do not conflict with the letter or the general objects and
purposes of Congressional legislation”)
4 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
though the dual banking system’s main virtue is its diver
gent treatment of national and state banks,6 Congress has
consistently recognized that state law must usually govern
the activities of both national and state banks for the dual
banking system to operate effectively. As early as 1934,
Justice Brandeis observed for the Court that this congres
sional recognition is embodied in a long string of statutes:
“The policy of equalization was adopted in the Na
tional Bank Act of 1864, and has ever since been ap
plied, in the provision concerning taxation. In
amendments to that act and in the Federal Reserve
Act and amendments thereto the policy is expressed
in provisions conferring power to establish branches;
in those conferring power to act as fiduciary; in those
concerning interest on deposits; and in those concern
ing capitalization. It appears also to have been of
some influence in securing the grant in 1913 of the
power to loan on mortgage.” Lewis v. Fidelity & De
posit Co. of Md., 292 U. S. 559, 564–565 (footnotes,
with citations to relevant statutes, omitted).7
For the same reasons, we observed in First Nat. Bank in
Plant City v. Dickinson, 396 U. S. 122, 133 (1969), that
“[t]he policy of competitive equality is . . . firmly embedded
in the statutes governing the national banking system.”
So firmly embedded, in fact, that “the congressional policy
of competitive equality with its deference to state stan
dards” is not “open to modification by the Comptroller of
the Currency.” Id., at 138.
——————
6 See Scott, The Dual Banking System: A Model of Competition in
Regulation, 30 Stan. L. Rev. 1, 8–13 (1978) (explaining the perceived
benefits of the dual banking system).
7 See also First Nat. Bank of Logan v. Walker Bank & Trust Co., 385
U. S. 252, 261 (1966) (observing that in passing the McFadden Act,
“Congress was continuing its policy of equalization first adopted in the
National Bank Act of 1864”).
Cite as: 550 U. S. ____ (2007) 5
STEVENS, J., dissenting
II
Although the dual banking system has remained intact,
Congress has radically transformed the national bank
system from its Civil War antecedent and brought consid
erably more federal authority to bear on state-chartered
institutions. Yet despite all the changes Congress has
made to the national bank system, and despite its exercise
of federal power over state banks, it has never preempted
state laws like those at issue in this case.
Most significantly, in 1913 Congress established the
Federal Reserve System to oversee federal monetary
policy through its influence over the availability of credit.
Federal Reserve Act §§2, 9, 38 Stat. 252, 259. The Act
required national banks and permitted state banks to
become Federal Reserve member banks, and subjected all
member banks to Federal Reserve regulations and over
sight. Ibid. Also of signal importance, after the banking
system collapsed during the Great Depression, Congress
required all member banks to obtain deposit insurance
from the newly established Federal Deposit Insurance
Corporation. Banking Act of 1933 (or Glass-Steagall Act),
§8, 48 Stat. 168; see also Banking Act of 1935, 49 Stat.
684. Although both of these steps meant that many state
banks were subjected to significant federal regulation,8
“the state banking system continued along with the na
tional banking system, with no attempt to exercise pre
emptive federal regulatory authority over the activities of
the existing state banks.” M. Malloy, Banking and Finan
cial Services Law 48 (2d ed. 2005).
In addition to these systemic overhauls, Congress has
——————
8 What has emerged are “two interrelated systems in which most
state-chartered banks are subject to varying degrees of federal regula
tion, and where state laws are made applicable, to a varying extent, to
federally-chartered institutions.” 1 A. Graham, Banking Law §1.04,
p. 1–12 (Nov. 2006).
6 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
over time modified the powers of national banks. The
changes are too various to recount in detail, but two are of
particular importance to this case. First, Congress has
gradually relaxed its prohibition on mortgage lending by
national banks. In 1913, Congress permitted national
banks to make loans secured by farm land, Federal Re
serve Act, §24, 38 Stat. 273, and in succeeding years, their
mortgage-lending power was enlarged to cover loans on
real estate in the vicinity of the bank, Act of Sept. 7, 1916,
39 Stat. 754, and loans “secured by first liens upon forest
tracts which are properly managed in all respects,” Act of
Aug. 15, 1953, ch. 510, 67 Stat. 614. Congress substan
tially expanded national banks’ power to make real estate
loans in 1974, see Housing and Community Development
Act, Title VII, §711, 88 Stat 716, and in 1982 it enacted
the broad language, now codified at 12 U. S. C. §371(a),
authorizing national banks to make “loans . . . secured by
liens on interests in real estate.” Garn-St Germain De
pository Institutions Act of 1982, Title IV, §403, 96 Stat.
1510. While these changes have enabled national banks
to engage in more evenhanded competition with state
banks, they certainly reflect no purpose to give them any
competitive advantage.9
Second, Congress has over the years both curtailed and
expanded the ability of national banks to affiliate with
other companies. In the early part of the century, banks
routinely engaged in investment activities and affiliated
with companies that did the same. The Glass-Steagall Act
put an end to that. “[E]nacted in 1933 to protect bank
depositors from any repetition of the widespread bank
——————
9 It is noteworthy that the principal cases that the Court cites to sup
port its conclusion that the federal statute itself preempts the Michigan
laws were decided years before Congress authorized national banks to
engage in mortgage lending and years before the Office of the Comp
troller of the Currency (OCC) authorized their use of operating subsidi
aries. See ante, at 6, 9.
Cite as: 550 U. S. ____ (2007) 7
STEVENS, J., dissenting
closings that occurred during the Great Depression,”
Board of Governors, FRS v. Investment Company Institute,
450 U. S. 46, 61 (1981), Glass-Steagall prohibited Federal
Reserve member banks (both state and national) from
affiliating with investment banks.10 In Congress’ view,
the affiliates had engaged in speculative activities that in
turn contributed to commercial banks’ Depression-era
failures.11 It was this focus on the welfare of depositors—
as opposed to stockholders—that provided the basis for
legislative action designed to ensure bank solvency.
A scant two years later, Congress forbade national
banks from owning the shares of any company because of
a similar fear that such ownership could undermine the
safety and soundness of national banks:12 “Except as
hereinafter provided or otherwise permitted by law, noth
ing herein contained shall authorize the purchase by [a
national bank] for its own account of any shares of stock of
any corporation.” Banking Act of 1935, §308(b), 49 Stat.
709 (emphasis added). That provision remains on the
books today. See 12 U. S. C. §24 Seventh.
These congressional restrictions did not forbid all affilia
tions, however, and national banks began experimenting
with new corporate forms. One of those forms involved the
——————
10 In Investment Company Institute v. Camp, 401 U. S. 617 (1971), we
set aside a regulation issued by the Comptroller of the Currency au
thorizing banks to operate collective investment funds because that
activity was prohibited by the Glass-Steagall Act. Similarly, in Securi
ties Industry Assn. v. Board of Governors, FRS, 468 U. S. 137 (1984),
the Glass-Steagall Act provided the basis for invalidating a regulation
authorizing banks to enter the business of selling third-party commer
cial paper.
11 See J. Macey, G. Miller, & R. Carnell, Banking Law and Regulation
21 (3d ed. 2001) (describing “the alleged misdeeds of the large banks’
securities affiliates and the ways in which such affiliations could
promote unsound lending, irresponsible speculation, and conflicts of
interest”).
12 See 31 Fed. Reg. 11459 (1966).
8 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
national bank ownership of “operating subsidiaries.” In
1966, the Comptroller of the Currency took the position
“that a national bank may acquire and hold the controlling
stock interest in a subsidiary operations corporation” so
long as that corporation’s “functions or activities . . . are
limited to one or several of the functions or activities that
a national bank is authorized to carry on.” 31 Fed. Reg.
11459 (1966). The Comptroller declined to read the cate
gorical prohibition on national bank ownership of stock to
foreclose bank ownership of operating subsidiaries, finding
authority for this aggressive interpretation of national
bank authority in the “incidental powers” provision of 12
U. S. C. §24 Seventh. See 31 Fed. Reg. 11460.
While Congress eventually restricted some of the new
corporate structures,13 it neither disavowed nor endorsed
the Comptroller’s position on national bank ownership of
operating subsidiaries. Notwithstanding the congres
sional silence, in 1996 the OCC once again attempted to
expand national banks’ ownership powers. The agency
issued a regulation permitting national bank operating
subsidiaries to undertake activities that the bank was not
allowed to engage in directly. 12 CFR §§5.34(d), (f) (1997)
(authorizing national banks to “acquire or establish an
operating subsidiary to engage in [activities] different
from that permissible for the parent national bank,” so
long as those activities are “part of or incidental to the
business of banking, as determined by the Comptroller of
the Currency”); see also 61 Fed. Reg. 60342 (1996).
Congress overruled this OCC regulation in 1999 in the
Gramm-Leach-Bliley Act (GLBA), 113 Stat. 1338. The
GLBA was a seminal piece of banking legislation inas
much as it repealed the Glass-Steagall Act’s ban on affilia
tions between commercial and investment banks. See
——————
13 See Bank Holding Company Act of 1956, 70 Stat. 133; Bank Hold
ing Company Act Amendments of 1970, 84 Stat. 1760.
Cite as: 550 U. S. ____ (2007) 9
STEVENS, J., dissenting
§101, id., at 1341. More relevant to this case, however,
the GLBA addressed the powers of national banks to own
subsidiary corporations. The Act provided that any na
tional bank subsidiary engaging in activities forbidden to
the parent bank would be considered a “financial subsidi
ary,” §121, id., at 1380, and would be subjected to height
ened regulatory obligations, see, e.g., 12 U. S. C. §371c–
1(a)(1). The GLBA’s definition of “financial subsidiaries”
excluded those subsidiaries that “engag[e] solely in activi
ties that national banks are permitted to engage in di
rectly and are conducted subject to the same terms and
conditions that govern the conduct of such activities by
national banks.” §24a(g)(3).
By negative implication, then, only subsidiaries engag
ing in purely national bank activities—which the OCC had
termed “operating subsidiaries,” but which the GLBA
never mentions by name—could avoid being subjected to
the restrictions that applied to financial subsidiaries.
Compare §371c(b)(2) (exempting subsidiaries from certain
regulatory restrictions) with §371c(e) (clarifying that
financial subsidiaries are not to be treated as “subsidiar
ies”). Taken together, these provisions worked a rejection
of the OCC’s position that an operating subsidiary could
engage in activities that national banks could not engage
in directly.14 See §24a(g)(3). Apart from this implicit
rejection of the OCC’s 1996 regulation, however, the
GLBA does not even mention operating subsidiaries.
——————
14 While the statutory text provides ample support for this conclusion,
it is noteworthy that it was so understood by contemporary commenta
tors. See, e.g., 145 Cong. Rec. 29681 (1999) (“Recently, the Comptroller
of the Currency has interpreted section 24 (Seventh) of the National
Bank Act to permit national banks to own and control subsidiaries
engaged in activities that national banks cannot conduct directly.
These decisions and the legal reasoning therein are erroneous and
contrary to the law. The [GLBA] overturns these decisions . . . .”
(statement of Representative Bliley)).
10 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
In sum, Congress itself has never authorized national
banks to use subsidiaries incorporated under state law to
perform traditional banking functions. Nor has it author
ized OCC to “license” any state-chartered entity to do so.
The fact that it may have acquiesced in the OCC’s expan
sive interpretation of its authority is a plainly insufficient
basis for finding preemption.
III
It is familiar learning that “[t]he purpose of Congress is
the ultimate touchstone of pre-emption analysis.” Cipol
lone v. Liggett Group, Inc., 505 U. S. 504, 516 (1992) (in
ternal quotation marks omitted). In divining that con
gressional purpose, I would have hoped that the Court
would hew both to the NBA’s text and to the basic rule,
central to our federal system, that “[i]n all pre-emption
cases . . . we ‘start with the assumption that the historic
police powers of the States were not to be superseded by
the Federal Act unless that was the clear and manifest
purpose of Congress.’ ” Medtronic, Inc. v. Lohr, 518 U. S.
470, 485 (1996) (quoting Rice v. Santa Fe Elevator Corp.,
331 U. S. 218, 230 (1947)). Had it done so, it could have
avoided the untenable conclusion that Congress meant the
NBA to preempt the state laws at issue here.
The NBA in fact evinces quite the opposite congressional
purpose. It provides in 12 U. S. C. §484(a) that “[n]o
national bank shall be subject to any visitorial powers
except as authorized by Federal law.” Although this ex
emption from state visitorial authority has been in place
for more than 140 years, see §54, 13 Stat. 116 (national
banks “shall not be subject to any other visitorial powers
than such as are authorized by this act”), it is significant
that Congress has never extended 12 U. S. C. §484(a)’s
preemptive blanket to cover national bank subsidiaries.
This is not, contrary to the Court’s suggestion, see ante,
at 14–15, some kind of oversight. As the complex history
Cite as: 550 U. S. ____ (2007) 11
STEVENS, J., dissenting
of the banking laws demonstrates, Congress has legislated
extensively with respect to national bank “affiliates”—an
operating subsidiary is one type of affiliate15—and has
moreover given the OCC extensive supervisory powers
over those affiliates, see §481 (providing that a federal
examiner “shall have power to make a thorough examina
tion of all the affairs of [a national bank] affiliate, and in
doing so he shall have power . . . to make a report of his
findings to the Comptroller of the Currency”). That Con
gress lavished such attention on national bank affiliates
and conferred such far-reaching authority on the OCC
without ever expanding the scope of §484(a) speaks vol
umes about Congress’ preemptive intent, or rather its lack
thereof. Consistent with our presumption against pre
emption—a presumption I do not understand the Court to
reject—I would read §484(a) to reflect Congress’ consid
ered judgment not to preempt the application of state
visitorial laws to national bank “affiliates.”
Instead, the Court likens §484(a) to a congressional
afterthought, musing that it merely “recogniz[es] the
burdens and undue duplication that state controls could
produce.” Ante, at 9. By that logic, I take it the Court
believes that the NBA would impliedly preempt all state
visitorial laws as applied to national banks even if §484(a)
did not exist. That is surprising and unlikely. Not only
would it reduce the NBA’s express preemption provision to
so much surplusage, but it would give Congress’ silence
greater statutory dignity than an express command.
Perhaps that explains why none of the four Circuits to
have addressed this issue relied on the preemptive force of
the NBA itself. Each instead asked whether the OCC’s
regulations preempted state laws.16 Stranger still, the
——————
15 See 12 U. S. C. §221a(b) (defining affiliates to include “any corpora
tion” that a federal member bank owns or controls).
16 See National City Bank of Indiana v. Turnbaugh, 463 F. 3d 325,
12 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
Court’s reasoning would suggest that operating subsidiar
ies have been exempted from state visitorial authority
from the moment the OCC first authorized them in 1966.
See 31 Fed. Reg. 11459. Yet if that were true, surely at
some point over the last 40 years some national bank
would have gone to court to spare its subsidiaries from the
yoke of state regulation; national banks are neither heed
less of their rights nor shy of litigation. But respondents
point us to no such cases that predate the OCC’s preemp
tion regulations.
The Court licenses itself to ignore §484(a)’s limits by
reasoning that “when state prescriptions significantly
impair the exercise of authority, enumerated or incidental
under the NBA, the State’s regulations must give way.”
Ante, at 7. But it intones this “significant impairment”
refrain without remembering that it merely provides a
useful tool—not the only tool, and not even the best tool—
to discover congressional intent. As we explained in Bar
nett Bank, this Court “take[s] the view that normally
Congress would not want States to forbid, or to impair
significantly, the exercise of a power that Congress has
explicitly granted.” 517 U. S., at 33 (emphasis added).
But any assumption about what Congress “normally”
wants is of little moment when Congress has said exactly
what it wants.
The Court also puts great weight on Barnett Bank’s
reference to our “history . . . of interpreting grants of both
enumerated and incidental ‘powers’ to national banks as
grants of authority not normally limited by, but rather
ordinarily pre-empting, contrary state law.” Id., at 32.
The Court neglects to mention that Barnett Bank is quite
——————
331–334 (CA4 2006) (holding that State law conflicted with OCC
regulations, not with the NBA); Wachovia Bank, N. A. v. Burke, 414 F.
3d 305, 315–316 (CA2 2005) (same); 431 F. 3d 556, 560–563 (CA6 2005)
(case below) (same); Wells Fargo Bank, N. A. v. Boutris, 419 F. 3d 949,
962–967 (CA9 2005) (same).
Cite as: 550 U. S. ____ (2007) 13
STEVENS, J., dissenting
clear that this interpretive rule applies only when Con
gress has failed (as it often does) to manifest an explicit
preemptive intent. Id., at 31. “In that event, courts must
consider whether the federal statute’s ‘structure and
purpose,’ or nonspecific statutory language, nonetheless
reveal a clear, but implicit, pre-emptive intent.” Ibid.
(emphasis added). Barnett Bank nowhere holds that we
can ignore strong indicia of congressional intent whenever
a state law arguably trenches on national bank powers.
After all, the case emphasized that the question of pre
emption “is basically one of congressional intent. Did
Congress, in enacting the Federal Statute, intend to exer
cise its constitutionally delegated authority to set aside
the laws of a State?” Id., at 30. The answer here is a
resounding no.
Even if it were appropriate to delve into the significant
impairment question, the history of this very case con
firms that neither the Mortgage Brokers, Lenders, and
Services Licensing Act, Mich. Comp. Laws Ann. §445.1651
et seq. (West 2002 and Supp. 2006), nor the Secondary
Mortgage Loan Act, §493.51 et seq. (West 2005), conflicts
with “the letter or the general objects and purposes of
Congressional legislation.” Davis v. Elmira Savings Bank,
161 U. S. 275, 290 (1896). Enacted to protect consumers
from mortgage lending abuses, the Acts require mortgage
brokers, mortgage servicers, and mortgage lenders to
register with the State, §§445.1652(1) (West Supp. 2006),
493.52(1) (West 2005), to submit certain financial state
ments, §§445.1657(2) (West 2002), 493.56a(2) (West 2005),
and to submit to state visitorial oversight, §§445.1661
(West 2002), 493.56b (West 2005). Because the Acts ex
pressly provide that they do not apply to “depository fi
nancial institution[s],” §445.1675(a) (West 2002), neither
national nor state banks are covered.17 The statute there
——————
17 While the Court at one point observes that “the Michigan provi
14 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
fore covers only nonbank companies incorporated under
state law.18
Respondent Wachovia Mortgage Corporation has never
engaged in the core banking business of accepting depos
its. In 1997, when Wachovia Mortgage was first licensed
to do business in Michigan, it was owned by a holding
company that also owned the respondent Wachovia Bank,
N. A. (Neither the holding company nor the Bank did
business in Michigan.) There is no evidence, and no rea
son to believe, that compliance with the Michigan statutes
imposed any special burdens on Wachovia Mortgage’s
activities, or that the transfer in 2003 of its ownership
from the holding company to the Bank required it to make
any changes whatsoever in its methods of doing business.
Neither before nor after that transfer was there any dis
cernible federal interest in granting the company immu
nity from regulations that applied evenhandedly to its
competitors. The mere fact that its activities may also be
performed by its banking parent provides at best a feeble
justification for immunizing it from state regulation. And
it is a justification that the longstanding congressional
“policy of competitive equality” clearly outweighs. See
Plant City, 396 U. S., at 133.
Again, however, it is beside the point whether in the
Court’s judgment the Michigan laws will hamper national
banks’ ability to carry out their banking functions through
operating subsidiaries. It is Congress’ judgment that
matters here, and Congress has in the NBA preempted
——————
sions at issue exempt national banks from coverage,” see ante, 8, that is
because they are “banks,” not because they are “national.” See ante, at
2–3 (noting that “Michigan’s statutory regime exempts banks, both
national and state, from state mortgage lending regulation” (emphasis
added)).
18 The Michigan laws focus on consumer protection, whereas the OCC
regulations quoted by the Court focus on protection of bank depositors.
See ante, at 7, n. 4, and 11, n. 8.
Cite as: 550 U. S. ____ (2007) 15
STEVENS, J., dissenting
only those laws purporting to lodge with state authorities
visitorial power over national banks. 12 U. S. C. §484(a).
In my view, the Court’s eagerness to infuse congressional
silence with preemptive force threatens the vitality of
most state laws as applied to national banks—a result at
odds with the long and unbroken history of dual state and
federal authority over national banks, not to mention our
federal system of government. It is especially troubling
that the Court so blithely preempts Michigan laws de
signed to protect consumers. Consumer protection is
quintessentially a “field which the States have tradition
ally occupied,” Rice, 331 U. S., at 230;19 the Court should
therefore have been all the more reluctant to conclude that
the “clear and manifest purpose of Congress” was to set
aside the laws of a sovereign State, ibid.
IV
Respondents maintain that even if the NBA lacks pre
emptive force, the GLBA’s use of the phrase “same terms
and conditions” reflects a congressional intent to preempt
state laws as they apply to the mortgage lending activities
of operating subsidiaries. See 12 U. S. C. §24a(g)(3).
Indeed, the Court obliquely suggests as much, salting its
analysis of the NBA with references to the GLBA. See
ante, at 13, 15. Even a cursory review of the GLBA’s text
shows that it cannot bear the preemptive weight respon
dents (and perhaps the Court) would assign to it.
The phrase “same terms and conditions” appears in the
definition of “financial subsidiary,” not in a provision of
the statute conferring national bank powers. Even there,
it serves only to describe what a financial subsidiary is
not. See §24a(g)(3) (defining financial subsidiary as any
——————
19 Seealso General Motors Corp. v. Abrams, 897 F. 2d 34, 41–43 (CA2
1990) (“Because consumer protection law is a field traditionally regu
lated by the states, compelling evidence of an intention to preempt is
required in this area”).
16 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
subsidiary “other than a subsidiary that . . . engages solely
in activities that national banks are permitted to engage
in directly and are conducted subject to the same terms
and conditions that govern the conduct of such activities
by national banks”). Apart from this slanting reference,
the GLBA never mentions operating subsidiaries. Far
from a demonstration that the “clear and manifest pur
pose of Congress” was to preempt the type of law at issue
here, Rice, 331 U. S., at 230, the “same terms and condi
tions” language at most reflects an uncontroversial ac
knowledgment that operating subsidiaries of national
banks are subject to the same federal oversight as their
national bank parents.20 It has nothing to do with
preemption.
Congress in fact disavowed any such preemptive intent.
Section 104 of the GLBA is titled “Operation of State
Law,” 113 Stat. 1352, and it devotes more than 3,000
words to explaining which state laws Congress meant the
GLBA to preempt. Leave aside the oddity of a Congress
that addresses preemption in exquisite detail in one provi
sion of the GLBA but (according to respondents) uses only
four words to express a preemptive intent elsewhere in the
statute. More importantly, §104(d)(4) provides that “[n]o
State statute . . . shall be preempted” by the GLBA unless
that statute has a disparate impact on federally chartered
depository institutions, “prevent[s] a depository institution
or affiliate thereof from engaging in activities authorized
or permitted by this Act,” or “conflict[s] with the intent of
this Act generally to permit affiliations that are author
ized or permitted by Federal law.” Id., at 1357 (emphasis
added) (codified at 15 U. S. C. §6701(d)(4)). No one claims
that the Michigan laws at issue here are discriminatory,
forbid affiliations, or “prevent” any operating subsidiary
——————
20 See 31 Fed. Reg. 11460 (noting that OCC maintains regulatory
oversight of operating subsidiaries).
Cite as: 550 U. S. ____ (2007) 17
STEVENS, J., dissenting
from engaging in banking activities. It necessarily follows
that the GLBA does not preempt them.
Even assuming that the phrase has something to do
with preemption, it is simply not the case that the nonen
croachment of state regulation is a “term and condition” of
engagement in the business of banking. As a historical
matter, state laws have always applied to national banks
and have often encroached on the business of banking.
See National Bank, 9 Wall., at 362 (observing that na
tional banks “are subject to the laws of the State, and are
governed in their daily course of business far more by the
laws of the State than of the nation”). The Court itself
acknowledges that state usury, contract, and property law
govern the activities of national banks and their subsidiar
ies, ante, at 6, notwithstanding that they vary across “all
States in which the banks operate,” ante, at 8. State law
has always provided the legal backdrop against which
national banks make real estate loans, and “[t]he fact that
the banking agencies maintain a close surveillance of the
industry with a view toward preventing unsound practices
that might impair liquidity or lead to insolvency does not
make federal banking regulation all-pervasive.” United
States v. Philadelphia Nat. Bank, 374 U. S. 321, 352
(1963).
V
In my view, the most pressing questions in this case are
whether Congress has delegated to the Comptroller of the
Currency the authority to preempt the laws of a sovereign
State as they apply to operating subsidiaries, and if so,
whether that authority was properly exercised here. See
12 CFR §7.4006 (2006) (“State laws apply to national bank
operating subsidiaries to the same extent that those laws
apply to the parent national bank”). Without directly
answering either question, the Court concludes that pre
emption is the “necessary consequence” of various con
gressional statutes. Ante, at 15. Because I read those
18 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
statutes differently, I must consider (as did the four Cir
cuits to have addressed this issue) whether an administra
tive agency can assume the power to displace the duly
enacted laws of a state legislature.
To begin with, Congress knows how to authorize execu
tive agencies to preempt state laws.21 It has not done so
here. Nor does the statutory provision authorizing banks
to engage in certain lines of business that are “incidental”
to their primary business of accepting and managing the
funds of depositors expressly or implicitly grant the OCC
the power to immunize banks or their subsidiaries from
state regulation.22 See 12 U. S. C. §24 Seventh. For there
is a vast and obvious difference between rules authorizing
or regulating conduct and rules granting immunity from
regulation. The Comptroller may well have the authority
to decide whether the activities of a mortgage broker, a
real estate broker, or a travel agent should be character
ized as “incidental” to banking, and to approve a bank’s
——————
21 See,e.g., 47 U. S. C. §§253(a), (d) (authorizing the Federal Commu
nications Commission to preempt “any [state] statute, regulation, or
legal requirement” that “may prohibit or have the effect of prohibiting
the ability of any entity to provide any interstate or intrastate tele
communications service”); 30 U. S. C. §1254(g) (preempting any statute
that conflicts with “the purposes and the requirements of this chapter”
and permitting the Secretary of the Interior to “set forth any State law
or regulation which is preempted and superseded”); 49 U. S. C.
§5125(d) (authorizing the Secretary of Transportation to decide
whether a state or local statute that conflicts with the regulation of
hazardous waste transportation is preempted).
22 Congress did make an indirect reference to regulatory preemption
in the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, §114, 108 Stat. 2367 (codified at 12 U. S. C. §43(a)). The Riegle-
Neal Act requires the OCC to jump through additional procedural
hoops (specifically, notice and comment, even for opinion letters and
interpretive rules) before “conclud[ing] that Federal law preempts the
application to a national bank of any State law regarding community
reinvestment, consumer protection, fair lending, or the establishment of
intrastate branches.” Ibid. By its own terms, however, this provision
granted no preemption authority to the OCC.
Cite as: 550 U. S. ____ (2007) 19
STEVENS, J., dissenting
entry into those businesses, either directly or through its
subsidiaries. See, e.g., NationsBank of N. C., N. A. v.
Variable Annuity Life Ins. Co., 513 U. S. 251, 258 (1995)
(upholding the OCC’s interpretation of the “incidental
powers” provision to permit national banks to serve as
agents in annuity sales). But that lesser power does not
imply the far greater power to immunize banks or their
subsidiaries from state laws regulating the conduct of
their competitors.23 As we said almost 40 years ago, “the
congressional policy of competitive equality with its defer
ence to state standards” is not “open to modification by the
Comptroller of the Currency.” Plant City, 396 U. S., at
138.24
——————
23 In a recent adoption of a separate preemption regulation, the OCC
located the source of its authority to displace state laws in 12
U. S. C. §§93a and 371. See 69 Fed. Reg. 1908 (2004). Both provisions
are generic authorizations of rulemaking authority, however, and
neither says a word about preemption. See 12 U. S. C. §93a (“[T]he
Comptroller of the Currency is authorized to prescribe rules and
regulations to carry out the responsibilities of the office”); §371(a)
(authorizing national banks to make real estate loans “subject to . . .
such restrictions and requirements as the Comptroller of the Currency
may prescribe by regulation or order”). Needless to say, they provide
no textual foundation for the OCC’s assertion of preemption authority.
24 This conclusion does not touch our cases holding that a properly
promulgated agency regulation can have a preemptive effect should it
conflict with state law. See Hillsborough County v. Automated Medical
Laboratories, Inc., 471 U. S. 707, 713 (1985) (“We have held repeatedly
that state laws can be pre-empted by federal regulations as well as by
federal statutes”); see also Fidelity Fed. Sav. & Loan Assn. v. De la
Cuesta, 458 U. S. 141, 154–159 (1982) (holding that a regulation
authorizing federal savings-and-loan associations to include due-on-sale
clauses in mortgage contracts conflicted with a state-court doctrine that
such clauses were unenforceable); City of New York v. FCC, 486 U. S.
57, 59, 65–70 (1988) (finding that the FCC’s adoption of “regulations
that establish technical standards to govern the quality of cable televi
sion signals” preempted local signal quality standards). My analysis is
rather confined to agency regulations (like the one at issue here) that
“purpor[t] to settle the scope of federal preemption” and “reflec[t] an
agency’s effort to transform the preemption question from a judicial
20 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
Were I inclined to assume (and I am not) that congres
sional silence should be read as a conferral of preemptive
authority, I would not find that the OCC has actually
exercised any such authority here. When the agency
promulgated 12 CFR §7.4006, it explained that “[t]he
section itself does not effect preemption of any State law; it
reflects the conclusion we believe a Federal court would
reach, even in the absence of the regulation . . . .” 66 Fed.
Reg. 34790 (2001) (emphasis added). Taking the OCC at
its word, then, §7.4006 has no preemptive force of its own,
but merely predicts how a federal court’s analysis will
proceed.
Even if the OCC did intend its regulation to preempt the
state laws at issue here, it would still not merit Chevron
deference. No case from this Court has ever applied such
a deferential standard to an agency decision that could so
easily disrupt the federal-state balance. To be sure, expert
agency opinions as to which state laws conflict with a
federal statute may be entitled to “some weight,” espe
cially when “the subject matter is technical” and “the
relevant history and background are complex and exten
sive.” Geier v. American Honda Motor Co., 529 U. S. 861,
883 (2000). But “[u]nlike Congress, administrative agen
cies are clearly not designed to represent the interests of
States, yet with relative ease they can promulgate com
prehensive and detailed regulations that have broad pre
emption ramifications for state law.” Id., at 908
(STEVENS, J., dissenting).25 For that reason, when an
agency purports to decide the scope of federal preemption,
a healthy respect for state sovereignty calls for something
——————
inquiry into an administrative fait accompli.” See Note, The Unwar
ranted Regulatory Preemption of Predatory Lending Laws, 79
N. Y. U. L. Rev. 2274, 2289 (2004).
25 See also Mendelson, Chevron and Preemption, 102 Mich. L. Rev.
737, 779–790 (2003–2004) (arguing that agencies are generally insensi
tive to federalism concerns).
Cite as: 550 U. S. ____ (2007) 21
STEVENS, J., dissenting
less than Chevron deference. See 529 U. S., at 911–912;
see also Medtronic, 518 U. S., at 512 (O’Connor, J., concur
ring in part and dissenting in part) (“It is not certain that
an agency regulation determining the pre-emptive effect of
any federal statute is entitled to deference”).
In any event, neither of the two justifications the OCC
advanced when it promulgated 12 CFR §7.4006 withstand
Chevron analysis. First, the OCC observed that the GLBA
“expressly acknowledged the authority of national banks
to own subsidiaries” that conduct national bank activities
“ ‘subject to the same terms and conditions that govern the
conduct of such activities by national banks.’ ” 66 Fed.
Reg. 34788 (quoting 12 U. S. C. §24a(g)(3)). The agency
also noted that it had folded the “ ‘same terms and condi
tions’ ” language into an implementing regulation, 66 Fed.
Reg. 34788 (citing 12 CFR §5.34(e)(3) (2001)). According
to the OCC, “[a] fundamental component of these descrip
tions of the characteristics of operating subsidiaries in
GLBA and the OCC’s rule is that state laws apply to
operating subsidiaries to the same extent as they apply to
the parent national bank.” 66 Fed. Reg. 34788.
This is incorrect. As explained above, the GLBA’s off
hand use of the “same terms and conditions” language
says nothing about preemption. See supra, at 15–17. Nor
can the OCC’s incorporation of that language into a regu
lation support the agency’s position: “Simply put, the
existence of a parroting regulation does not change the
fact that the question here is not the meaning of the regu
lation but the meaning of the statute.” Gonzales v. Ore
gon, 546 U. S. 243, 257 (2006). The OCC’s argument to
the contrary is particularly surprising given that when it
promulgated its “same terms and conditions” regulation, it
said not one word about preemption or the federalism
implications of its rule—an inexplicable elision if a “fun
damental component” of the phrase is the need to operate
unfettered by state oversight. Compare 65 Fed. Reg.
22 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
12905–12910 (2000), with Exec. Order No. 13132, §§2, 4,
64 Fed. Reg. 43255, 43257 (1999) (requiring agencies to
explicitly consider the “federalism implications” of their
chosen policies and to hesitate before preempting state
laws).
Second, the OCC describes operating subsidiaries “as
the equivalent of departments or divisions of their parent
banks,” 66 Fed. Reg. 34788, which, through the operation
of 12 U. S. C. §484(a), would not be subject to state visito
rial powers. The OCC claims that national banks might
desire to conduct their business through operating sub
sidiaries for the purposes of “controlling operations costs,
improving effectiveness of supervision, more accurate
determination of profits, decentralizing management
decisions [and] separating particular operations of the
bank from other operations.” Brief for United States as
Amicus Curiae 19 (quoting 31 Fed. Reg. 11460). It is
obvious, however, that a national bank could realize all of
those benefits through the straightforward expedient of
dissolving the corporation and making it in fact a “de
partment” or a “division” of the parent bank.
Rather, the primary advantage of maintaining an oper
ating subsidiary as a separate corporation is that it
shields the national bank from the operating subsidiaries’
liabilities. United States v. Bestfoods, 524 U. S. 51, 61
(1998) (“It is a general principle of corporate law deeply
ingrained in our economic and legal systems that a parent
corporation . . . is not liable for the acts of its subsidiary”
(internal quotation marks omitted)). For that reason, the
OCC’s regulation is about far more than mere “corporate
structure,” ante, at 13, or “internal governance,” ante, at
17 (citing Wells Fargo Bank, N. A. v. Boutris, 419 F. 3d
949, 960 (CA9 2005)); see also Dole Food Co. v. Patrickson,
538 U. S. 468, 474 (2003) (“In issues of corporate law
structure often matters”). It is about whether a state
corporation can avoid complying with state regulations,
Cite as: 550 U. S. ____ (2007) 23
STEVENS, J., dissenting
yet nevertheless take advantage of state laws insulating
its owners from liability. The federal interest in protect
ing depositors in national banks from their subsidiaries’
liabilities surely does not justify a grant of immunity from
laws that apply to competitors. Indeed, the OCC’s regula
tion may drive companies seeking refuge from state regu
lation into the arms of federal parents, harm those state
competitors who are not lucky enough to find a federal
benefactor, and hamstring States’ ability to regulate the
affairs of state corporations. As a result, the OCC’s regu
lation threatens both the dual banking system and the
principle of competitive equality that is its cornerstone.
VI
The novelty of today’s holding merits a final comment.
Whatever the Court says, this is a case about an adminis
trative agency’s power to preempt state laws. I agree with
the Court that the Tenth Amendment does not preclude
the exercise of that power. But the fact that that Amend
ment was included in the Bill of Rights should neverthe
less remind the Court that its ruling affects the allocation
of powers among sovereigns. Indeed, the reasons for
adopting that Amendment are precisely those that under
gird the well-established presumption against preemption.
With rare exception, we have found preemption only
when a federal statute commanded it, see Cipollone, 505
U. S., at 517, when a conflict between federal and state
law precluded obedience to both sovereigns, see Florida
Lime & Avocado Growers, Inc. v. Paul, 373 U. S. 132, 142–
143 (1963), or when a federal statute so completely occu
pied a field that it left no room for additional state regula
tion, see Napier v. Atlantic Coast Line R. Co., 272 U. S.
605, 613 (1926). Almost invariably the finding of preemp
tion has been based on this Court’s interpretation of statu
tory language or of regulations plainly authorized by
Congress. Never before have we endorsed administrative
24 WATTERS v. WACHOVIA BANK, N. A.
STEVENS, J., dissenting
action whose sole purpose was to preempt state law rather
than to implement a statutory command.
Accordingly, I respectfully dissent.