Wells Fargo Bank N.A. v. Boutris

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

WELLS FARGO BANK N.A.; WELLS 
FARGO HOME MORTGAGE, No. 03-16194
Plaintiffs-Appellees,
v.  D.C. No.
CV-03-00157-
DEMETRIOS A. BOUTRIS, GEB(JFM)
Defendant-Appellant.


NATIONAL CITY BANK OF INDIANA; 
NATIONAL CITY MORTGAGE CO., No. 03-16461
Plaintiffs-Appellees,
v.  D.C. No.
CV-03-00655-
DEMETRIOS A. BOUTRIS, GEB/JFM
Defendant-Appellant.


WELLS FARGO BANK N.A.; WELLS  No. 03-16197
FARGO HOME MORTGAGE,
Plaintiffs-Appellants, D.C. No.
v.  CV-03-00157-
GEB(JFM)
DEMETRIOS A. BOUTRIS,
OPINION
Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of California
Garland E. Burrell, District Judge, Presiding

Argued and Submitted
November 4, 2004—San Francisco, California
10455
10456 WELLS FARGO BANK v. BOUTRIS
Filed August 12, 2005

Before: Stephen Reinhardt, Richard A. Paez, and
Marsha S. Berzon, Circuit Judges.

Opinion by Judge Berzon
 WELLS FARGO BANK v. BOUTRIS 10459

COUNSEL

Virginia Jo Dunlap, Deputy Commissioner, Alan S. Weinger,
Supervising Counsel, Judy L. Hartley, Senior Corporations
Counsel, Kimberly L. Gauthier, Corporations Counsel, and
Douglas M. Gooding, Corporations Counsel, California
Department of Corporations, Los Angeles, California, for the
defendant-appellant/cross-appellee.

William L. Stern, Severson & Werson, San Francisco, Cali-
fornia, and E. Edward Bruce, Stuart C. Stock, Robert A.
Long, Jr., and Keith A. Noreika, Covington & Burling, Wash-
ington, D.C., for the plaintiffs-appellees/cross-appellants.

Julie L. Williams, Acting Comptroller, Daniel P. Stipano,
Acting Chief Counsel, L. Robert Griffin, Deputy Chief Coun-
10460 WELLS FARGO BANK v. BOUTRIS
sel, and Horace G. Sneed, Director of Litigation, U.S. Depart-
ment of the Treasury, Office of the Comptroller of the Cur-
rency, Washington, D.C., for amicus curiae Office of the
Comptroller of the Currency.

Edward P. Sangster and Dylan B. Carp, Kirkpatrick & Lock-
hart LLP, San Francisco, California, for amicus curiae
Quicken Loans Inc.

OPINION

BERZON, Circuit Judge:

In these cross-appeals concerning California’s regulation of
residential mortgage lenders, we decide two issues: First,
does the National Bank Act (“Bank Act”), 12 U.S.C. §§ 21 et
seq., preempt the California Commissioner of Corporations’
(“the Commissioner”) exercise of investigative and licensing
authority over “operating subsidiaries” of national banks?
Second, does section 501 of the Depository Institutions
Deregulation and Monetary Control Act of 1980 (DIDMCA),
12 U.S.C. § 1735f-7a, preempt California’s per diem loan-
interest statute?

The district court answered both questions in the affirma-
tive. Wells Fargo Bank, N.A. v. Boutris, 265 F. Supp. 2d 1162
(E.D. Cal. 2003) (Wells Fargo II).1 For the reasons that fol-
low, we affirm the district court’s conclusion as to preemption
under the Bank Act but hold that the per diem loan-interest
statute is not preempted by the DIDMCA.
1
We refer to the final judgment of the district court as “Wells Fargo II”
to distinguish it from that court’s earlier ruling granting in part and deny-
ing in part Wells Fargo’s motion for a preliminary injunction. See Wells
Fargo Bank, N.A. v. Boutris, 252 F. Supp. 2d 1065 (E.D. Cal. 2003)
(Wells Fargo I).
 WELLS FARGO BANK v. BOUTRIS 10461
I. Background

These appeals arise out of California’s attempts to require
Wells Fargo Home Mortgage Inc. (WFHMI) and National
City Mortgage Co. (NCMC), wholly owned subsidiaries of
Wells Fargo National Bank and National City Bank of Indi-
ana, respectively, to conduct audits of their residential mort-
gages. The purpose of the audits was to ascertain whether the
mortgage subsidiaries had overcharged interest and provided
unduly low estimates of certain classes of settlement fees, in
violation of California law.2 From 1996 to 2003,3 WFHMI
was licensed to engage in real estate lending activities under
the California Residential Mortgage Lending Act (CRMLA),
CAL. FIN. CODE §§ 50000 et seq.,4 and the California Finance
Lenders Law (CFLL), CAL. FIN. CODE §§ 22000 et seq.5 The
2
Wells Fargo has advised this court that WFHMI recently merged back
into Wells Fargo National Bank and so no longer exists as an independent
entity. Because this lawsuit seeks injunctive and declaratory relief regard-
ing an audit relating to the period before the merger, Wells Fargo’s claims
as to WFHMI are not moot. Further, even if they were, the legal issues
presented before would still be before us, as NCMC remains an operating
subsidiary of National City Bank of Indiana.
3
For clarity, we recite the facts only as they pertain to Wells Fargo and
WFHMI. There is no distinction between WFHMI and NCMC pertinent
to our disposition.
4
Specifically, the CRMLA provides that:
No person shall engage in the business of making residential
mortgage loans or servicing residential mortgage loans, in this
state, without first obtaining a license from the commissioner in
accordance with the requirements of Chapter 2 (commencing
with Section 50120) or Chapter 3 (commencing with Section
50130), and any rules promulgated by the commissioner under
this law, unless a person or transaction is excepted from a defini-
tion or exempt from licensure by a provision of this law or a rule
of the commissioner.
CAL. FIN. CODE § 50002(a). The licensing requirements referred to in the
section are discussed in more detail below.
5
The CFLL does not apply to any loans made pursuant to the CRMLA.
See CAL. FIN. CODE § 22060.
10462 WELLS FARGO BANK v. BOUTRIS
Commissioner is the state official charged with enforcing
those laws governing licensed home-mortgage lenders,
including a statute barring lenders from charging interest dur-
ing certain periods. CAL. FIN. CODE § 50204(o); see Wells
Fargo II, 265 F. Supp. 2d at 1164.

To that end, the Commissioner routinely conducts regula-
tory examinations of licensees’ records. The facts giving rise
to this suit began after one such examination, when

the Commissioner demanded that WFHMI conduct
an audit of its residential mortgage loans made in
California during 2001 and 2002. The purpose of the
audit was to identify all loans where WFHMI
charged per diem interest in violation of California
Financial Code § 50204(o), so that WFHMI could
make appropriate refunds, and identify instances of
understating finance charges in violation of the fed-
eral Truth in Lending Act. WFHMI objected to the
Commissioner’s request in a letter dated January 22,
2003, in which it asserted because it is an operating
subsidiary of a national bank it is subject to the
OCC’s exclusive regulatory authority.

Id. (citations omitted).

Five days after sending its objection letter to the Commis-
sioner, Wells Fargo filed this suit in the U.S. District Court
for the Eastern District of California, seeking declaratory and
injunctive relief. Wells Fargo’s position throughout this litiga-
tion has been that the Commissioner cannot require an audit
because the relevant provisions of California law from which
any such authority derives are preempted by federal laws and
regulations — specifically, by the Bank Act, the DIDMCA,
and the regulations promulgated by the Office of the Comp-
 WELLS FARGO BANK v. BOUTRIS 10463
troller of the Currency thereunder, 12 C.F.R. §§ 5.1 et seq.
(2005).6

On February 4, 2003, eight days after Wells Fargo filed this
suit, the Commissioner instituted administrative proceedings
against WFHMI to revoke its California licenses. Wells Fargo
sought a preliminary injunction, both to bar the administrative
proceedings and to enjoin the Commissioner from continuing
to exercise “visitorial” authority over WFHMI.7 The district
court rejected the injunction application as to the revocation
proceedings, but granted the preliminary injunction as to the
visitorial authority issue.8
6
The agency, to which we interchangeably refer as the “OCC” or
“Comptroller,” has appeared in this case as amicus curiae. We acknowl-
edge their helpful participation in clarifying a complex statutory scheme.
7
As the district court observed, “visitorial power[ ] . . . generally refers
to the power of the OCC to ‘visit’ a national bank to examine its activities
and its observance of applicable laws, and encompasses any examination
of a national bank’s records relative to the conduct of its banking business
as well as any enforcement action that may be undertaken for violations
of law.” Wells Fargo II, 265 F. Supp. 2d at 1165 n.5 (internal quotation
marks omitted).
For a helpful early overview of visitorial authority under the Bank Act,
see First National Bank of Youngstown v. Hughes, 6 F. 737, 740-42
(C.C.N.D. Ohio 1881), appeal dismissed, 106 U.S. 523 (1883). See also
First Union Nat’l Bank v. Burke, 48 F. Supp. 2d 132, 137-38 (D. Conn.
1999); Peoples Bank of Danville v. Williams, 449 F. Supp. 254, 258-59
(W.D. Va. 1978). On the common-law understanding of visitorial power,
see Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518,
673-76 (1819) (Story, J., concurring); and Allen v. McKean, 1 F. Cas. 489,
497-98 (C.C.D. Me. 1833) (No. 229) (Story, Circuit Justice).
8
In granting the preliminary injunction in part and denying it in part, the
district court ruled that “the Commissioner is preliminarily enjoined from
exercising visitorial powers over Plaintiffs or from otherwise preventing
WFHMI from operating in California; however, the portion of Plaintiffs’
motion seeking to preliminarily enjoin the Commissioner from revoking
WFHMI’s California issued licenses is denied.” Wells Fargo I, 252 F.
Supp. 2d at 1074. The court refused to enjoin the license revocation
because “[i]t would be ironic for an injunction to issue in such circum-
stances since WFHMI could have avoided the harm it contends it will suf-
fer had it chosen to comply with the requirements of the California
licenses it possesses.” Id. (internal quotation marks omitted).
10464 WELLS FARGO BANK v. BOUTRIS
The parties then cross-moved for summary judgment. The
district court granted Wells Fargo’s motion for summary
judgment on the preemption claims and the Commissioner’s
motion for summary judgment on the retaliation claim. The
court also entered a permanent injunction against the Com-
missioner, barring him from “exercising visitorial powers
over Plaintiffs and from enforcing California Financial Code
§ 50204(o) and California Civil Code § 2948.5 against Plain-
tiffs.” Wells Fargo II, 265 F. Supp. 2d at 1179. These appeals
followed.

II. Bank Act Preemption

As we observed three years ago:

Congress has legislated in the field of banking
from the days of M’Culloch v. Maryland, creating an
extensive federal statutory and regulatory scheme.
The history of national banking legislation has been
“one of interpreting grants of both enumerated and
incidental ‘powers’ to national banks as grants of
authority not normally limited by, but rather ordinar-
ily pre-empting, contrary state law.”

Bank of Am. v. City & County of San Francisco, 309 F.3d
551, 558 (9th Cir. 2002) (quoting Barnett Bank of Marion
County, N.A. v. Nelson, 517 U.S. 25, 32 (1996)) (citation
omitted).

In light of this history, we held in Bank of America that the
usual presumption against federal preemption of state law is
inapplicable to federal banking regulation. See 309 F.3d at
558-59. Thus, “[i]n defining the pre-emptive scope of statutes
and regulations granting a power to national banks, [the
Supreme Court’s jurisprudence] take[s] the view that nor-
mally Congress would not want States to forbid, or to impair
significantly, the exercise of a power that Congress explicitly
granted.” Barnett Bank, 517 U.S. at 33. As shall become
 WELLS FARGO BANK v. BOUTRIS 10465
apparent, our analysis draws on these animating principles of
federal primacy and exclusivity in the field of banking regula-
tion. Cf. Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 10
(2003) (recognizing “the special nature of federally chartered
banks”).

A. Operating Subsidiaries and the Bank Act

[1] At the core of these appeals is 12 C.F.R. § 7.4006, a
regulation promulgated by the OCC in 2001, which states:
“Unless otherwise provided by Federal law or OCC regula-
tion, State laws apply to national bank operating subsidiaries
to the same extent that those laws apply to the parent national
bank.” See Investment Securities; Bank Activities and Opera-
tions; Leasing, 66 Fed. Reg. 34,784, 34,788-89 (July 2, 2001).
Section 7.4006 does not define “operating subsidiary.”
Instead, the term is defined, indirectly, in both the Bank Act
and OCC regulations, as 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 con-
ditions that govern the conduct of such activities by national
banks.” 12 U.S.C. § 24a(g)(3)(A); see also 12 C.F.R.
§ 5.39(d)(6)(i).9 The federal banking statutes do not otherwise
mention operating subsidiaries.
9
The definition is indirect because it is contained within the exceptions
to the definition of “financial subsidiary” in 12 U.S.C. § 24a(g)(3) and 12
C.F.R. § 5.39(d). A financial subsidiary, by contrast, is “any company that
is controlled by 1 or more insured depository institutions other than a[n
operating] subsidiary [or a subsidiary that] . . . a national bank is specifi-
cally authorized by the express terms of a Federal statute (other than this
section), and not by implication or interpretation, to control . . . .” 12
U.S.C. § 24a(g)(3).
In the original version of current 12 C.F.R. § 5.34, the comprehensive
rule governing “operating subsidiaries” to which we return shortly, an
operating subsidiary was defined as “a corporation the functions or activi-
ties of which are limited to one or several of the functions or activities that
a national bank is authorized to carry on.” Acquisition of Controlling
Stock Interest in Subsidiary Operations Corporation, 31 Fed. Reg. 11,459,
11,459 (Aug. 31, 1966) (formerly codified at 12 C.F.R. § 7.10) [hereinaf-
ter “Operating Subsidiary Rule”]. The current regulation, codified at
§ 5.34, contains no such definition.
10466 WELLS FARGO BANK v. BOUTRIS
The Commissioner’s central contention is that this regula-
tion is beyond the scope of the OCC’s delegated authority.
More specifically, the Commissioner maintains that because
operating subsidiaries are not, themselves, “national banks,”
they are therefore not subject to exclusively federal regulation
to the same extent as are national banks. His argument there-
fore challenges the propriety of the regulation, raising a ques-
tion of first impression in this circuit.10 Although posed in the
singular, the question whether the OCC may preempt contrary
state law as applied to operating subsidiaries of national banks
depends, in our view, on the answer to two logically prior
questions: First, we must resolve whether the OCC regulation
allowing national banks to create and operate subsidiaries that
perform national bank functions is consistent with the Bank
Act. Second, we need to consider whether the OCC may regu-
late such entities. Only after answering these first two ques-
tions can we decide whether the OCC may regulate such
entities to the exclusion of the states in the two areas pertinent
here — visitorial authority and licensing requirements.

One final point bears mention at the outset: Because the
parties’ arguments turn almost entirely on the OCC’s interpre-
tation of the Bank Act, a necessary threshold question to our
analysis here is whether, and to what extent, the OCC’s
implementation of the Act, as manifested in § 7.4006, is enti-
tled to deference.
10
Besides the district court in this case, the other courts that have ruled
on this specific issue (which appears to have been litigated only since the
promulgation of 12 C.F.R. § 7.4006 in July 2001) are the Second Circuit,
see Wachovia Bank, N.A. v. Burke, No. 04-3770-CV, 2005 WL 1607740
(2d Cir. July 11, 2005), and the U.S. District Courts for the District of
Maryland, see Nat’l City Bank of Ind. v. Turnbaugh, 367 F. Supp. 2d 805
(D. Md. 2005), and the Western District of Michigan, see Wachovia Bank,
N.A. v. Watters, 334 F. Supp. 2d 957 (W.D. Mich. 2004), appeal docketed,
No. 04-2257 (6th Cir. Oct. 14, 2004). Each of the other courts held, as did
the district court here and as do we, that the Bank Act preempts the rele-
vant state laws.
 WELLS FARGO BANK v. BOUTRIS 10467
[2] The OCC is the agency “charged with supervision of
the National Bank Act.” NationsBank of N.C., N.A. v. Vari-
able Annuity Life Ins. Co., 513 U.S. 251, 256 (1995). Its rule-
making authority is codified at 12 U.S.C. § 93a, which
provides:

Except to the extent that authority to issue such
rules and regulations has been expressly and exclu-
sively granted to another regulatory agency, the
Comptroller of the Currency is authorized to pre-
scribe rules and regulations to carry out the responsi-
bilities of the office, except that the authority
conferred by this section does not apply to section 36
of this title [the McFadden Act] or to securities
activities of National Banks under the Act com-
monly known as the “Glass-Steagall Act”.

As the definition makes clear, this conferral of regulatory
authority is as broad as the OCC’s statutory responsibilities,
defined piecemeal throughout the Bank Act. See, e.g., 12
U.S.C. §§ 25a(e), 26, 29, 71, 84(d), 92, 92a(a), 93(d), 211(a),
371, 481, 633(b); see also Conference of State Bank Supervi-
sors v. Conover, 710 F.2d 878, 883 (D.C. Cir. 1983) (per
curiam).11

[3] Given this rulemaking authority, the OCC’s interpreta-
tion of ambiguous language in the Bank Act is entitled to def-
erence under the two-step framework of Chevron U.S.A., Inc.
v. Natural Resources Defense Council, 467 U.S. 837 (1984):

Under the familiar two-step analysis in Chevron,
if Congress has “directly spoken to the precise ques-
11
The Supreme Court has affirmed that the OCC is the agency generally
responsible for the administration of the Bank Act, citing 12 U.S.C. §§ 1,
26-27, and 481 in support of that conclusion. See NationsBank, 513 U.S.
at 256; see also Inv. Co. Inst. v. Camp, 401 U.S. 617, 626-27 (1971) (cit-
ing First Nat’l Bank v. Missouri, 263 U.S. 640, 658 (1924)).
10468 WELLS FARGO BANK v. BOUTRIS
tion at issue,” then the matter is capable of but one
interpretation by which the court and the agency
must abide. By contrast, where we determine that a
statute is not clear, “the question for the court is
whether the agency’s answer is based on a permissi-
ble construction of the statute.”

Vigil v. Leavitt, 381 F.3d 826, 834 (9th Cir. 2004) (quoting
Chevron, 467 U.S. at 842-43). As the statutory interpretation
issues we must address to determine the validity of § 7.4006
devolve into separate questions, as we have explained, the rel-
evant authority for each inquiry has separate statutory
sources, and the Chevron inquiry is necessarily step-by-step.
We therefore proceed to analyze the validity of § 7.4006 —
and the appropriate deference, if any, to accord to the OCC’s
relevant interpretations — incrementally.

B. The OCC’s Authority To Allow National Banks To
Operate Through Operating Subsidiaries

As noted, the Bank Act is silent regarding “operating sub-
sidiaries.”12 Congress has thus not addressed, except indi-
rectly, whether banks may organize and delegate banking
functions to such entities in the first place.
12
The Commissioner argues that Congress’s silence in the Bank Act
regarding operating subsidiaries resolves step one of the Chevron inquiry
in his favor. The district court in Wachovia Bank, N.A. v. Burke explained
why this expressio unius argument must fail: “While this silence might
have been significant to the court were it to interpret the statute de novo,
it does not answer the question asked by the first step of Chevron —
namely, whether Congress has ‘unambiguously expressed [its] intent.’ ”
319 F. Supp. 2d 275, 285 n.5 (D. Conn. 2004) (quoting Chevron, 467 U.S.
at 843) (alteration in original), aff’d in part, rev’d and vacated in part on
other grounds, No. 04-3770-CV, 2005 WL 1607740 (2d Cir. July 11,
2005). We agree. The absence of any reference to operating subsidiaries
in the Bank Act does not unambiguously provide that national banks may
not create and perform banking functions through such entities.
 WELLS FARGO BANK v. BOUTRIS 10469
[4] The Bank Act, however, does bestow upon national
banks the authority “[t]o exercise by its board of directors or
duly authorized officers or agents, subject to law, all such
incidental powers as shall be necessary to carry on the busi-
ness of banking; . . . .” 12 U.S.C. § 24(Seventh) (emphasis
added). This “incidental powers” provision is central to our
analysis here, as it is the basis for the OCC’s permission to
national banks to create and operate banking functions,
through subsidiaries.

Because § 24(Seventh) is not explicit on the limits of “inci-
dental powers,” the OCC is entitled to Chevron step-two def-
erence as to whether the Bank Act supports the creation of
operating subsidiaries pursuant to that provision. See Indep.
Ins. Agents of Am., Inc. v. Hawke, 211 F.3d 638, 640 (D.C.
Cir. 2000) (holding that the “incidental powers” provision
permits “the Comptroller [to] authorize additional activities if
encompassed by a reasonable interpretation of § 24(Sev-
enth)”). Our inquiry, then, is whether the agency interpreta-
tion allowing operating subsidiaries as an exercise of
“incidental powers” is reasonable. See, e.g., Hemp Indus.
Ass’n v. Drug Enforcement Admin., 357 F.3d 1012, 1015 (9th
Cir. 2004) (citing Barnhart v. Walton, 535 U.S. 212, 217-18
(2002)). We hold that it is.

The Supreme Court has approved the OCC’s interpretation
of the “incidental powers” provision as permitting a range of
bank authority beyond that specified in the statute. As the
Court has noted, because “the ‘business of banking’ is not
limited to the enumerated powers[13] in § 24 Seventh . . . the
Comptroller therefore has discretion to authorize activities
13
Section 24(Seventh) mentions some of the banks’ powers, including
“discounting and negotiating promissory notes, drafts, bills of exchange,
and other evidences of debt,” “receiving deposits,” “buying and selling
exchange, coin, and bullion,” “loaning money on personal security,” and
“obtaining, issuing, and circulating notes according to the provisions of
title 62 of the Revised Statutes [the Bank Act].”
10470 WELLS FARGO BANK v. BOUTRIS
beyond those specifically enumerated.” NationsBank, 513
U.S. at 258 n.2; see also Bank of Am., 309 F.3d at 562. At the
same time, “[t]he exercise of the Comptroller’s discretion,
however, must be kept within reasonable bounds. Ventures
distant from dealing in financial investment instruments —
for example, operating a general travel agency — may exceed
those bounds.” NationsBank, 512 U.S. at 258 n.2.14

[5] We have endorsed the approach adopted by the First
Circuit in Arnold Tours, Inc. v. Camp, 472 F.2d 427 (1st Cir.
1972), for delineating the scope of “incidental powers” under
§ 24(Seventh):

[A] national bank’s activity is authorized as an inci-
dental power, “necessary to carry on the business of
banking,” within the meaning of 12 U.S.C. § 24,
Seventh, if it is convenient or useful in connection
with the performance of one of the bank’s estab-
lished activities pursuant to its express powers under
the National Bank Act. If this connection between an
incidental activity and an express power does not
exist, the activity is not authorized as an incidental
power.

Id. at 432, quoted in M & M Leasing Corp. v. Seattle First
Nat’l Bank, 563 F.2d 1377, 1382 (9th Cir. 1977); see also
Nat’l Retailers Corp. of Ariz. v. Valley Nat’l Bank of Ariz.,
604 F.2d 32, 33 (9th Cir. 1979) (per curiam) (discussing our
adoption of Arnold Tours in M & M Leasing). Applying this
standard, we agree with the district court that the Comptroller
had the authority under § 24(Seventh) to permit banks to dele-
gate some of their banking functions to operating subsidiaries.
14
Congress, not the OCC, has explicitly authorized national banks to
engage in real estate lending. See 12 U.S.C. § 371(a). The Commissioner’s
argument, at various points in his briefs, that the regulation of real estate
lending falls outside the substantive scope of the OCC’s delegated author-
ity is therefore unavailing.
 WELLS FARGO BANK v. BOUTRIS 10471
Allowing national banks to create, control, and delegate
banking functions to operating subsidiaries provides some
assistance to banks in performing their authorized activities.
Indeed, the stated considerations motivating the initial adop-
tion of the operating subsidiary rule in 1966 were that devel-
oping such subsidiaries would aid banks in “controlling
operations costs, improving effectiveness of supervision, [pro-
viding for] more accurate determination of profits, decentral-
izing management decisions[,] or separating particular
operations of the bank from other operations.” Operating Sub-
sidiary Rule, 31 Fed. Reg. at 11,460. At the same time, per-
mitting operating subsidiaries does not expand the functions
carried out by the banks. The determination whether to con-
duct business through operating subsidiaries or, instead,
through subdivisions of the bank itself is thus essentially one
of internal organization, so long as the operating subsidiary
form of organization cannot be used to evade the rules that
apply to national banks. Under 12 C.F.R. § 5.34, the rule gov-
erning operating subsidiaries, such evasion is not permitted.
See 12 C.F.R. § 5.34(e)(1) (providing that “[a] national bank
may conduct in an operating subsidiary activities that are per-
missible for a national bank to engage in directly either as part
of, or incidental to, the business of banking, as determined by
the OCC, or otherwise under other statutory authority”); id.
§ 5.34(e)(3) (“An operating subsidiary conducts activities
authorized under this section pursuant to the same authoriza-
tion, terms and conditions that apply to the conduct of such
activities by its parent national bank.”).

[6] Allowing national banks to conduct business through
operating subsidiaries is therefore a permissible construction
of those banks’ incidental powers under the Bank Act. We
hold that the OCC’s interpretation of 12 U.S.C. § 24(Seventh)
as authorizing it to allow national banks to conduct business
through operating subsidiaries is a permissible one.
10472 WELLS FARGO BANK v. BOUTRIS
C. The OCC’s Authority To Regulate Operating
Subsidiaries

That the Bank Act may be construed as allowing private
national banks to conduct business through operating sub-
sidiaries does not, however, necessarily resolve whether the
Act also delegates to the OCC the authority to regulate such
entities. That is to say, § 24(Seventh) concerns the incidental
powers of national banks, not the extent of the OCC’s regula-
tory authority. Determining the reach of that authority is a
separate question, involving the interpretation of 12 U.S.C.
§ 93a.

Section 93a, like the rest of the Bank Act, is silent as to the
OCC’s authority to regulate operating subsidiaries. This court
has recognized, however, that the OCC’s authority to interpret
the reach of the “incidental powers” conferred by § 24(Sev-
enth) necessarily includes the authority to regulate the exer-
cise of those powers to assure that they remain “incidental” to
the “business of banking.”

We so held in M & M Leasing, in which the central ques-
tion was whether the leasing of automobiles by national banks
was within the “incidental powers” of such banks, as the
Comptroller had determined. After determining that, within
limits, it is, we made clear that the Comptroller has both the
authority and the “duty” “to promulgate reasonably detailed
regulations which will confine leasing within the channels of
the ‘business of banking.’ ” 563 F.2d at 1384. M & M Leas-
ing’s conclusion that “[p]reparation of a comprehensive char-
ter [for the exercise of “incidental powers”] is a function that
belongs to the Comptroller,” id., necessarily makes the pro-
mulgation of such regulations one of the “responsibilities of
the office” contemplated by § 93a, as to which the Commis-
sioner has rulemaking power.

[7] M & M Leasing’s logic applies here. Just as the Comp-
troller’s authority to regulate national banks’ leasing activities
 WELLS FARGO BANK v. BOUTRIS 10473
is inherent in his authority to interpret the “incidental powers”
provision to allow such leasing in the first place, his authority
to regulate operating subsidiaries also follows from the
OCC’s authority to allow such entities.

Further, the OCC operating subsidiary regulations most
pertinent to the present inquiry quite directly address the
reach of the national banks’ “incidental powers” authority to
create and conduct their business through such entities. Those
regulations, quoted above, restrict the range of activities that
operating subsidiaries may conduct to those in which their
parent banks may engage, see 12 C.F.R. §§ 5.34(e),
5.39(d)(6)(i), and state that such subsidiaries are subject to the
same federal rules and standards “that apply to the conduct of
such activities by its parent national bank.” Id. § 5.34(e)(3).
These provisions ensure that the decision to conduct banking
activities through subsidiaries neither expands the national
banks’ scope of activities nor undermines the authority of the
OCC to regulate those activities. By establishing these princi-
ples, the regulations circumscribe the decision to use operat-
ing subsidiaries so that it remains only “incidental” to the
“business of banking.”

In regulating the conduct of operating subsidiaries, more-
over, the OCC is regulating only those activities it is explic-
itly authorized to regulate under the Bank Act. For federal
regulatory purposes, in other words, the OCC is treating each
operating subsidiary for the most part as if it were a national
bank itself, conducting the same activities. In the latter
instance, of course, the OCC’s regulatory authority is unques-
tioned. As we concluded twenty-eight years ago, “whatever
the scope of such [incidental] powers may be, we believe the
powers of national banks must be construed so as to permit
the use of new ways of conducting the very old business of
banking.” M & M Leasing, 563 F.2d at 1382.

[8] We conclude that the OCC has permissibly applied 12
U.S.C. § 93a to regulate operating subsidiaries of national
banks.
10474 WELLS FARGO BANK v. BOUTRIS
D. The OCC’s Exclusive Authority To Regulate
Operating Subsidiaries

[9] As the Supreme Court has explained:

When the administrator promulgates regulations
intended to pre-empt state law, the court’s inquiry is
. . . limited: “If [h]is choice represents a reasonable
accommodation of conflicting policies that were
committed to the agency’s care by the statute, we
should not disturb it unless it appears from the stat-
ute or its legislative history that the accommodation
is not one that Congress would have sanctioned.”

Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S.
141, 154 (1982) (quoting United States v. Shimer, 367 U.S.
374, 383 (1961)) (alteration in original); see also La. Pub.
Serv. Comm’n v. F.C.C., 476 U.S. 355, 369 (1986) (“Pre-
emption may result not only from action taken by Congress
itself; a federal agency acting within the scope of its congres-
sionally delegated authority may pre-empt state regulation.”);
Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119,
1128 (9th Cir. 2005); Lopez v. Wash. Mut. Bank, FA, 302 F.3d
900, 906 (9th Cir. 2002), amended by 311 F.3d 928 (9th Cir.
2002).

[10] Applying these principles here, we conclude that pro-
mulgating § 7.4006 was within the OCC’s authority. Section
7.4006 provides that a state law is preempted as applied to an
operating subsidiary only if it would be preempted as applied
to a national bank. By so stating, the OCC has simply expli-
cated further its specification, in 12 C.F.R. § 5.34(e)(1) and
(3), that operating subsidiaries are to have the same authority
as, and be subject to the same governmental regulation as,
their national banks parents, by making clear in § 7.4006 that
the principle is symmetrical: Operating subsidiaries are sub-
ject to no less and no more governmental regulation, state and
federal, than national banks. The connection between the
 WELLS FARGO BANK v. BOUTRIS 10475
OCC’s substantive determinations regarding the authority of
national banks to conduct their business through operating
subsidiaries and the preemption regulation is thus close and
logical. We are therefore convinced that once the OCC’s
authority to allow the creation of and to regulate operating
subsidiaries as it has done is established, its authority to dis-
place contrary state regulation where the Bank Act itself pre-
empts contrary state regulation of national banks follows.15
That § 7.4006 is “a reasonable accommodation of conflicting
policies that were committed to the agency’s care by the stat-
ute,” Fidelity, 458 U.S. at 154 (internal quotation marks omit-
ted), is further supported by an unusual provision in the Bank
Act itself. Indeed, 12 U.S.C. § 43 specifically contemplates
that the OCC sometimes has authority to preempt state laws
such as those here at issue. See 12 U.S.C. § 43 (setting proce-
dural prerequisites for OCC regulations preempting “[s]tate
law regarding community reinvestment, consumer protection,
fair lending, or the establishment of intrastate branches”
(emphasis added)).16

With this general approval of the OCC’s preemptive
authority regarding state law regulation of national bank oper-
ating subsidiaries in mind, we turn to the specific state laws
that WFHMI and the OCC maintain are preempted under
§ 7.4006.
15
Accord Wachovia Bank, N.A. v. Burke, No. 04-3770-CV, 2005 WL
1607740 (2d Cir. July 11, 2005) (holding the Bank Act and OCC regula-
tions preempt state banking laws concerning subsidiaries of nationally
chartered banks to the same extent that they preempt regulation of the par-
ent national bank).
16
As the Commissioner here maintains, the laws he is seeking to enforce
concern consumer protection. Section 43 prescribes the procedures that
“the appropriate Federal banking agency,” in this instance the OCC, see
12 U.S.C. § 1813(z), must follow whenever it issues an “opinion letter or
interpretive rule” concluding that certain state laws, including consumer
protection laws, are preempted as applied to national banks, see id.
§ 43(a). There is no allegation in this case that the OCC did not follow the
requisite procedures.
10476 WELLS FARGO BANK v. BOUTRIS
1. Visitorial Power Under the Bank Act

WFHMI and the OCC submit that the Commissioner’s state
law authority to conduct or require audits of national bank
operating subsidiaries is displaced by § 7.4006. Their argu-
ment, with which we agree, is that section 54 of the Bank Act,
12 U.S.C. § 484, makes federal “visitorial” authority — but
not necessarily federal substantive law — exclusive with
regard to national banks, and § 7.4006 extends that exclusiv-
ity to operating subsidiaries.

[11] Since shortly after the Bank Act was enacted in 1864,17
see Nat’l Bank v. Kentucky, 76 U.S. (9 Wall.) 353, 362
(1870), the Supreme Court has oft reiterated that federal sub-
stantive authority over national banks is not exclusive. Rather,
states may regulate national banks where “doing so does not
prevent or significantly interfere with the national bank’s
exercise of its powers.” Barnett Bank, 517 U.S. at 33; see also
id. (citing cases). “Thus, states retain some power to regulate
national banks in areas such as contracts, debt collection,
acquisition and transfer of property, and taxation, zoning,
criminal, and tort law.” Bank of Am., 309 F.3d at 559.

[12] One area of authority over national banks that has his-
torically been the exclusive province of the federal govern-
ment, however, is the “visitorial” power. For purposes of the
Bank Act and OCC regulations, the OCC has defined “visi-
torial” power as “(i) [e]xamination of a bank; (ii) [i]nspection
of a bank’s books and records; (iii) [r]egulation and supervi-
sion of activities authorized or permitted pursuant to federal
banking law; and (iv) [e]nforcing compliance with any appli-
cable federal or state laws concerning those activities.” 12
17
Although the Bank Act was promulgated in 1864, the current banking
statutes largely derive from the Bank Act’s immediate predecessor, the
National Currency Act of 1863, ch. 58, 12 Stat. 665. See U.S. Nat’l Bank
of Ore. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 449 & n.4 (1993)
(summarizing the statutory history).
 WELLS FARGO BANK v. BOUTRIS 10477
C.F.R. § 7.4000(a)(2). The exclusivity of federal visitorial
authority over national banks is codified in the Bank Act, sec-
tion 54 of which provides that:

No national bank shall be subject to any visitorial
powers except as authorized by Federal law, vested
in the courts of justice or such as shall be, or have
been exercised or directed by Congress or by either
House thereof or by any committee of Congress or
of either House duly authorized.

12 U.S.C. § 484(a).18

As the definition makes clear, the preemption of state law
accomplished by § 484(a) is entirely procedural, not substan-
tive. The exclusively federal power to “visit” national banks
is not the power to oust all state regulation of those entities.
Instead, the exclusivity of visitorial authority preempts only
enforcement of state visitation laws by state officials, subject
to the exceptions stated in § 484(a) itself. See, e.g., Nat’l State
Bank, Elizabeth, N.J. v. Long, 630 F.2d 981, 989 (3d Cir.
1980); cf. Conference of Fed. Sav. & Loan Ass’ns v. Stein,
604 F.2d 1256, 1260 (9th Cir. 1979) (holding that regulatory
control provided by California’s Housing Financial Discrimi-
nation Act is procedurally preempted by Federal Home Loan
Bank Board authority), summarily aff’d, 445 U.S. 921 (1980)
(mem.). National banks remain bound by state laws and regu-
lations, except for those laws substantively preempted by
other provisions of the Bank Act.

[13] Still, despite its procedural limitation, § 484(a) does
“evidence[ ] a broad intent to preempt state law as to national
banks.” Wachovia Bank, N.A. v. Burke, 319 F. Supp. 2d 275,
279 (D. Conn. 2004), aff’d in part, rev’d and vacated in part
18
But for minor technical corrections in 1913 and 1982, the provision
remains unchanged from its initial codification in 1864. See Act of June
3, 1864, ch. 106, § 54, 13 Stat. 99, 116.
10478 WELLS FARGO BANK v. BOUTRIS
on other grounds, No. 04-3770-CV, 2005 WL 1607740 (2d
Cir. July 11, 2005); see also Guthrie v. Harkness, 199 U.S.
148, 159 (1905) (“It was the intention that this statute should
contain a full code of provisions upon the subject, and that no
state law or enactment should undertake to exercise the right
of visitation over a national corporation. Except in so far as
such corporation was liable to control in the courts of justice,
this act was to be the full measure of visitorial power.”); Tif-
fany v. Nat’l Bank of Mo., 85 U.S. (18 Wall.) 409, 412 (1873).
The power the Commissioner claimed in ordering WFHMI
and NCMC to audit their loan records rests on precisely the
inspection and enforcement authority preempted by § 484(a).
The OCC’s conclusion that § 484(a) and § 7.4006, taken
together, foreclose the exercise of such authority by the states,
is thus eminently “permissible.” Chevron, 467 U.S. at 843.

[14] We hold that the Commissioner is preempted from
ordering regulatory audits of national bank operating sub-
sidiaries such as WFHMI and NCMC, and that the injunction
issued by the district court is valid insofar as it precludes the
Commissioner from doing so.

2. Licensing Authority Under the Bank Act

WFHMI and, particularly, the OCC also argue that Califor-
nia’s state real-estate lending licensing requirements are pre-
empted as applied to national bank operating subsidiaries.

The state law requirements here at issue are codified in sec-
tions 50120-50130 of the California Finance Code, part of the
CRMLA.19 Although the licensing requirements as a whole
are too exhaustive to recount here, the most significant provi-
sions are section 50121, which imposes four conditions on the
19
We focus here on the CRMLA licensing requirements. The CFLL
licensing requirements, which, as noted above, are relevant only where the
CRMLA does not apply, see ante at 10461 n.5, are codified at CAL. FIN.
CODE §§ 22100-22112.
 WELLS FARGO BANK v. BOUTRIS 10479
granting of a license,20 and section 50125(a), which empowers
the Commissioner to refuse to issue a license if “[t]he appli-
cant is not in material compliance with a provision of [the
CRMLA] or an order or rule of the commissioner.”

In light of the foregoing discussion, one might expect that
the proper route to evaluating whether the state law provisions
can apply to national bank operating subsidiaries would be to
apply the same analysis we applied to the visitorial preemp-
tion issue: If state licensing requirements are preempted as
applied to national banks, then § 7.4006 precludes applying
those requirements to operating subsidiaries. As it turns out,
this straightforward approach does not work as applied to
licensing requirements.
20
Specifically, the provision authorizes the Commissioner to issue a
license only after:
(a) The filing with the commissioner of a complete and verified
application for licensure.
(b) The filing as an exhibit to the application of a listing of
material judgments filed against, and bankruptcy petitions
filed by, the applicant for the preceding five years, and the
disposition thereof.
(c) The payment of a nonrefundable investigation fee of one
hundred dollars ($100), plus the cost of fingerprint process-
ing and clearance, and an application filing fee of nine hun-
dred dollars ($900).
(d) An investigation of the statements required by [California
Financial Code §] 50124 based upon which the commis-
sioner is able to issue findings that the financial responsibil-
ity, criminal records (verified by fingerprint, at the
discretion of the commissioner), experience, character, and
general fitness of the applicant and of the partners or mem-
bers thereof, if the applicant is a partnership or association,
and of the principal officers and directors thereof, if the
license applicant is a corporation, support a finding that the
business will be operated honestly, fairly, and in accordance
with the requirements of this division.
CAL. FIN. CODE § 50121.
10480 WELLS FARGO BANK v. BOUTRIS
Licensing is one mode of regulation as to which there is no
ready parallel between national banks and their operating sub-
sidiaries. The California licensing requirements at issue here,
for example, do not apply to national banks. See CAL. FIN.
CODE § 50003(g)(1) (exempting from the CRMLA’s licensing
requirements “[a]ny bank . . . doing business under the
authority of or in accordance with a license, certificate, or
charter issued by the United States”); see also id. § 22050(a)
(providing that the CFLL’s licensing requirements do not
apply to “any person doing business under any law of this
state or the United States relating to banks”).

That California saw fit to exempt national banks from its
mortgage-lending licensing requirements despite their preva-
lent activity in that area of business may well reflect the
state’s own conclusion — almost certainly a correct one —
that the chartering of national banks by the federal govern-
ment is an exclusive function, inconsistent with state licensing
requirements unless they are federally authorized.21 Operating
subsidiaries, however, are not directly chartered by the federal
government; instead, they are incorporated under a state’s law
— WFHMI in California; NCMC in Ohio. This chartering
distinction is the one irreducible difference between national
banks and their operating subsidiaries, and precludes the
direct transfer of the banks’ immunity from state entry barri-
ers, such as licensing requirements, to their operating sub-
sidiaries.

We are convinced, however, by the OCC’s alternative argu-
ment — that California’s attempt to license operating sub-
sidiaries is field-preempted by the OCC’s own licensing
regulations.22
21
The Bank Act itself refers to the charter as the “organization certifi-
cate,” which is created by the bank according to the terms of 12 U.S.C.
§§ 21-23, and approved by the Comptroller pursuant to the procedures set
forth in 12 U.S.C. §§ 26-27.
22
The substantive limits of the Bank Act’s express preemption provi-
sions do not preclude the possibility of implicit preemption. “[T]he inclu-
 WELLS FARGO BANK v. BOUTRIS 10481
[15] The OCC regulations establish a comprehensive and
finely calibrated scheme for the creation of operating sub-
sidiaries. Denominated “Licensing Requirements,” see 12
C.F.R. § 5.34(b), these regulations prescribe the specific cir-
cumstances in which a national bank needs formal approval
from the OCC to establish operating subsidiaries.

A national bank must ordinarily “submit an application to,
and receive approval from, the OCC,” before it acquires or
establishes any operating subsidiary. See id. § 5.34(e)(5)
(i)(A). “The application must include a complete description
of the bank’s investment in the subsidiary, the proposed activ-
ities of the subsidiary, the organizational structure and man-
agement of the subsidiary, the relations between the bank and
the subsidiary, and other information necessary to adequately
describe the proposal.” Id.

In some circumstances, national banks can create or acquire
an operating subsidiary without OCC approval, although
notice to the OCC is required: Under 12 C.F.R. § 5.34(e)
(5)(iv), operating subsidiaries can be established by a “well
capitalized” and “well managed” national bank (as defined by
12 C.F.R. § 5.34(d)(2)-(3)) solely by providing notice to the
OCC, so long as the activity falls within one of twenty-five
categories specifically delineated in 12 C.F.R. § 5.34(e)(5)(v).
No notice is required, however, for a well-capitalized bank to
establish an operating subsidiary, if the new subsidiary is con-
ducting activities already approved for an earlier operating
subsidiary of the same bank; those activities are legally per-
missible for the subsidiary; and the new subsidiary abides by
any conditions the OCC imposed on the activities of prior
operating subsidiaries of that bank. See id. § 5.34(e)(5)(vi). If

sion of an express preemption provision in a statute does not by itself
obviate implied preemption . . . .” Allarcom Pay Television, Ltd. v. Gen.
Instrument Corp., 69 F.3d 381, 387 (9th Cir. 1995); see also Ass’n of
Banks in Ins., Inc. v. Duryee, 270 F.3d 397, 404 (6th Cir. 2001) (citing
Anderson Nat’l Bank v. Luckett, 321 U.S. 233 (1944)).
10482 WELLS FARGO BANK v. BOUTRIS
the bank, however, “controls the subsidiary but owns 50 per-
cent or less of the voting (or similar type of controlling) inter-
est of the subsidiary,” then an application and OCC approval
are always necessary, and the exceptions noted above are
inapplicable. See id. § 5.34(e)(5)(i)(B). The OCC thus has a
role in either pre-approving or later reviewing the creation of
an operating subsidiary in most instances.

That the OCC has chosen to require formal agency
approval in certain cases but not in others, to require notice
in certain cases but not in others, and to specify the content
of the application or notice in great detail indicates to us that
§ 5.34 manifests the OCC’s intent to regulate pervasively the
field of licensing operating subsidiaries. Allowing certain
national banks to create certain classes of operating subsidia-
ries without case-by-case approval is itself a regulatory deci-
sion. Where such a decision not to regulate represents, as in
§ 5.34, a considered determination that no regulation is appro-
priate, that choice preempts contrary state law imposing gov-
erning standards. See, e.g., Lodge 76, Int’l Ass’n of
Machinists & Aerospace Workers v. Wis. Employment Rela-
tions Comm’n, 427 U.S. 132, 140 (1976) (holding that, by
regulating certain forms of economic pressure used during
labor disputes but not others, Congress expressed a clear
intent to leave other economic weapons free from federal or
state regulation). Such field preemption can occur when an
agency, acting pursuant to its delegated authority, promul-
gates regulations that evidence a clear intent to occupy a spe-
cific field. See, e.g., R.J. Reynolds Tobacco Co. v. Durham
County, N.C., 479 U.S. 130, 149 (1986) (“[W]here, as in this
case, Congress has entrusted an agency with the task of pro-
mulgating regulations to carry out the purposes of a statute,
as part of the pre-emption analysis we must consider whether
the regulations evidence a desire to occupy a field complete-
ly.” (citation omitted)).

[16] As we emphasized earlier, Congress and the OCC, act-
ing pursuant to congressional authority, have left some room
 WELLS FARGO BANK v. BOUTRIS 10483
for substantive regulation by the states in the field of banking.
In the specific context of licensing requirements for operating
subsidiaries authorized only to conduct those activities that
their parent national banks may conduct, however, the OCC’s
regulations “evidence a desire to occupy a field completely.”23
Id. A state’s attempt to require advance licensing before an
operating subsidiary may engage in the activities covered by
the Bank Act, including real estate lending, runs headlong
into the OCC’s finely nuanced licensing scheme.

[17] We hold that California’s real-estate lending licensing
requirements as applied to operating subsidiaries of national
banks are field-preempted by 12 C.F.R. § 5.34.

III. DIDMCA Preemption

Wells Fargo also maintains that the California “per diem”
loan-interest statute the Commissioner sought to enforce, pre-
cluding the charging of mortgage interest during certain pre-
recordation periods, is substantively preempted by the DID-
MCA. Despite our earlier rulings, we must decide this sub-
stantive preemption issue because it is pertinent to the reach
of the permanent injunction the district court may properly
issue.

[18] In relevant part, the DIDMCA express preemption
provision, section 501(a)(1), mandates that “[t]he provisions
of the constitution or the laws of any State expressly limiting
the rate or amount of interest, discount points, finance
charges, or other charges which may be charged, taken,
received, or reserved shall not apply to any loan, mortgage,
credit sale, or advance . . . .” that meets certain conditions. 12
U.S.C. § 1735f-7a(a)(1); see also Brown v. Investors Mort-
gage Co., 121 F.3d 472, 475 (9th Cir. 1997) (per curiam)
23
Whether the preemption analysis would be the same for all OCC
licensing of national bank subsidiaries, including financial subsidiaries, is
a question not before us, and one on which we express no opinion.
10484 WELLS FARGO BANK v. BOUTRIS
(summarizing and applying the statute). Neither party disputes
that WFHMI’s home-lending activities here at issue meet the
other conditions imposed by the DIDMCA exemption. The
debate is solely whether the California per diem interest stat-
ute “expressly limit[s] the rate or amount of interest.”

The California statutory provision with which we are con-
cerned is CAL. CIV. CODE § 2948.5(a).24 At the relevant times,25
that section provided:

A borrower shall not be required to pay interest on
a principal obligation under a promissory note
secured by a mortgage or deed of trust on real prop-
erty improved with between one to four residential
dwelling units for a period in excess of one day prior
to recording of the mortgage or deed of trust if the
loan proceeds are paid into escrow or, if there is no
escrow, the date upon which the loan proceeds have
been made available for withdrawal as a matter of
right, as specified in subdivision (d) of Section
12413.1 of the Insurance Code.

If a congressional statute includes a provision explicitly
preempting state law, the only issue we must decide is its
scope, using ordinary tools of statutory construction. See, e.g.,
Cipollone v. Liggett Group, Inc., 505 U.S. 504, 517-18
24
The district court referenced section 50204(o) of the California
Finance Code, which bars CRMLA licensees from “[c]ommit[ting] an act
in violation of Section 2948.5 of the Civil Code.” Our holding that the
CRMLA licensing requirements are preempted means that section
50204(o) is (and was) not enforceable against operating subsidiaries. The
applicability of section 2948.5, however, does not turn on whether the
lender is a licensee. Our conclusion that California’s licensing require-
ments are preempted therefore does not moot the DIDMCA preemption
issue.
25
The provision has since been amended, and now bars the collection of
per diem interest more than one day before disbursement, as opposed to
before recordation.
 WELLS FARGO BANK v. BOUTRIS 10485
(1992); Indep. Towers of Wash. v. Washington, 350 F.3d 925,
928 (9th Cir. 2003). The determinative question under the
DIDMCA preemption provision, 12 U.S.C. § 1735f-7a(a)(1),
is thus whether section 2948.5(a) serves “expressly” to limit
the “rate or amount of interest” that WFHMI may assess
against California borrowers.

The district court concluded that it does. In its words:

California’s per diem statutes limit the time during
which interest can be charged by prohibiting a lender
from charging interest on loaned mortgage funds for
a period in excess of one day prior to recordation of
the mortgage. By restricting the time period in which
a lender may collect interest on loaned mortgage
funds, the language of the per diem statutes “ex-
pressly limit[s] the rate or amount of interest . . .
which may be charged . . . .”

Wells Fargo II, 265 F. Supp. 2d at 1175 (quoting 12 U.S.C.
§ 1735f-7a(a)(1)) (alteration in original) (citations omitted).

We do not agree with this interpretation of the DIDMCA.
We are instead convinced by the First Circuit’s analysis in
Grunbeck v. Dime Savings Bank of New York, FSB, 74 F.3d
331 (1st Cir. 1996), and believe it fully applicable to Califor-
nia’s per diem loan-interest statute.

In Grunbeck, the court considered whether section
501(a)(1) of the DIDMCA preempted New Hampshire’s sim-
ple interest statute (SIS), which required lenders to compute
their interest rate by summing “simple interest,” i.e., by not
charging interest on unpaid interest. See N.H. REV. STAT. ANN.
§ 397-A:14. Dime Savings Bank argued that requiring lenders
to abide by the SIS would implicate the “rate or amount of
interest” chargeable against the borrower, and that the SIS
was therefore preempted by the DIDMCA. The First Circuit
10486 WELLS FARGO BANK v. BOUTRIS
held that there was no DIDMCA preemption, for two primary
reasons, both persuasive and both applicable here:

[19] First, Grunbeck emphasized that the DIDMCA is con-
cerned with only the “rate” and “amount” of interest charged,
not with other features of the interest calculation:

[Dime Savings Bank’s] arguments rest on the
implicit premise that the “amount” of interest the
lender may charge is “limited” by the SIS. On the
contrary, the SIS imposes no restriction on either the
“rate” or the “amount” of interest the borrower may
be charged, but merely requires that any interest rate
or amount agreed to by the parties be computed on
a “simple interest” basis. Thus, nothing in the SIS
prevents a lender from contracting for whatever sim-
ple interest rate will exact an interest return equal to
or greater than whatever rate and amount of interest
would be recoverable through compounding. The
SIS leaves entirely to the parties the rate and amount
of simple interest to be exacted.

Id. at 337.

[20] Here, similarly, the only direct restriction was on the
time for which interest may be charged, not on the rate that
may be charged when interest is in effect or the total amount
of interest that may be charged over the life of the loan.26
Banks were free to alter the post-recordation rate of interest
to account for any pre-recordation no-interest period, thereby
collecting the same total amount of interest as they would
have collected had they charged interest pre-recordation. We
agree with the First Circuit’s approach, and hold that where
“rates” and “amounts” of interest remain fully adjustable so
26
However compounded, an interest rate is usually defined as “a per-
centage of the principal payable for a one-year period,” BLACK’S LAW DIC-
TIONARY 831 (8th ed. 2004) — that is to say, a certain percent per year.
 WELLS FARGO BANK v. BOUTRIS 10487
that banks can obtain the same return that they would have
otherwise, a state regulation is not banned by the DIDMCA.

Second, and relatedly, Grunbeck gave careful attention to
an unusual feature of the language of section 501(a)(1) of the
DIDMCA — that it preempts only express limitations on rates
and amounts of interest. As Grunbeck explained, this textual
feature must be given effect by “focus[ing] . . . on whether the
‘express’ language of the [state statute] ‘limit[s]’ the rate or
amount of interest which the lender may charge,” not “on
broad-gauged assessments concerning the likely impact the
[state] ban on compounding would have on home-mortgage
lenders and the industry at large.” Id. at 337-38 (third alter-
ation in original). Any other “analytic focus . . . undermines
the required ‘plain language’ interpretation by extirpating —
from the pivotal section 501(a) clause: ‘expressly limiting the
rate or amount of interest’ — the important modifier ‘express-
ly.’ ” Id. at 337 (citation omitted).

With this textual analysis we agree as well. Here, as in
Grunbeck, there may well be practical reasons why banks will
not adjust their rates or amounts of interest to account for the
state restriction. As Grunbeck held, however, the DIDMCA
does not apply because of “likely impact,” as long as there is
no express limitation on interest rates or amounts.27

Wells Fargo argues that, aside from any impact theory, the
California per diem statute does expressly limit an interest
rate — it limits interest to zero percent for the period prior to
recordation. While clever, this argument again disregards the
critical and unusual modifier, “expressly.”
27
For reasons identified by Grunbeck, Quicken’s argument that we
should defer to the interpretation of the federal Office of Thrift Supervi-
sion is deficient. See Grunbeck, 74 F.3d at 336 (“Where Congress has spo-
ken directly to the issue, an interpretation rendered by the agency
responsible for administering the statute is entitled to no special defer-
ence.” (citing Chevron, 467 U.S. at 842)).
10488 WELLS FARGO BANK v. BOUTRIS
“Expressly” the per diem interest statute addresses only the
time period for which interest may be assessed, not the rate
of interest permissible for a period during which some interest
is payable. It would be odd to refer to a prohibition on collec-
tion of interest as a limitation specifically on the rate of inter-
est, as opposed to a limitation on the imposition of interest or
on the time period which interest may cover. Also, the evident
purpose of the statute, albeit imperfectly addressed, is to pro-
tect consumers by providing an incentive for completion of
tasks necessary to perfect the purchase, not to limit the rate or
amount of interest paid; as long as recordation was completed,
any amount of interest could be charged.

[21] For these reasons, we hold that California’s per diem
interest statute, CAL. CIV. CODE § 2948.5, is not preempted by
section 501(a)(1) of the DIDMCA, 12 U.S.C. § 1735f-
7a(a)(1).

Conclusion

As Justice Jackson forcefully put it a half-century ago,
“[w]e cannot resolve conflicts of authority by our judgment as
to the wisdom or need of either conflicting policy. The com-
pact between the states creating the Federal Government
resolves them as a matter of supremacy.” Franklin Nat’l Bank
of Franklin Square v. New York, 347 U.S. 373, 378-79 (1954).

“[A]s a matter of supremacy,” the Bank Act, read together
with 12 C.F.R. § 7.4006, preempts the exercise of visitorial
authority over operating subsidiaries of national banks. Like-
wise, 12 C.F.R. § 5.34 field-preempts California’s licensing
authority over such entities.28 Section 501(a)(1) of the DID-
MCA, however, does not preempt California’s per diem loan-
interest statutes.
28
Wells Fargo asserted in its briefs before this court that we need not
reach its retaliation claim against the Commissioner if we conclude that
the licensing requirements are preempted. Because we so conclude, we
deem this argument abandoned.
 WELLS FARGO BANK v. BOUTRIS 10489
We therefore remand these appeals to the district court for
modification of the permanent injunction entered against the
Commissioner, and for further proceedings as necessary, con-
sistent with this opinion.

AFFIRMED in part, REVERSED in part, and
REMANDED.29

29
Each party shall bear its own costs on appeal. See Fed. R. App. P.
39(a)(4).