Viewpoint: Preemption Authorized for State Banks, Too

By Eager, Robert C. | American Banker, May 4, 2007 | Go to article overview

Viewpoint: Preemption Authorized for State Banks, Too


Eager, Robert C., American Banker


The Supreme Court's April 17 decision in Watters v. Wachovia holds that states have no regulatory authority over national-bank operating subsidiaries, because of preemption by the OCC's visitorial powers, the same as for the national bank. This major preemption question is now settled.

A corollary issue for state banks: Watters squarely supports a parallel result under a federal statute enacted last fall that clothes the home-state supervisors of state-chartered banks with visitorial powers parallel to the OCC's.

Congress gave the home-state supervisors general federal visitorial powers over state banks (and their operating subsidiaries) in Section 711 of the Financial Services Regulatory Relief Act of 2006. Section 711 and the 1997 "applicable law" amendments to the Riegle-Neal Act establish a federal regime providing that state banks are governed by their home state's law wherever they operate - a structure parallel to the national bank regime.

Watters also means that the FDIC should complete, and expand, its 2005 rulemaking concerning preemption for state banks under the Riegle-Neal Act of 1994 ("Riegle-Neal I"), as amended in 1997 ("Riegle-Neal II"), to give effect to Section 711, as well. That rulemaking should construe these federal statutes to provide competitive parity for state banks, creating a strong dual banking system and a highly competitive interstate business environment.

Section 711 strengthens the interstate banking regime enacted under the Commerce Clause. It establishes the supremacy of the home state with respect to examination, supervision, enforcement, and collection of all fees or other charges in connection with the business of a state "bank" wherever it is conducted.

Section 711 is materially parallel to the national-bank visitorial powers provision, 12 U.S.C. Section 484. It expressly limits the host-state agency's power to examine for or enforce law only to the laws "applicable" under the Riegle-Neal regime. No role is given any agency in any state where a state bank, or an operating subsidiary, may have only a nonbranch office or customers. Any state's law that conflicts with Section 711 is preempted, parallel to the preemption of state law under Section 484 for national banks.

Section 711 is the fifth federal statute providing competitive parity in a multistate marketplace. In addition to Riegle-Neal I and II, Section 27 of the Federal Deposit Insurance Act provides for the "export" of home-state interest rates for state banks, and Section 104(d) of the Gramm-Leach-Bliley Act preempts burdensome or discriminatory state laws affecting any financial activity of any insured depository institution, affiliate, or associated person.

Section 711 amends Section 10(h) of the FDI Act, 12 U.S.C. Section 1820(h), and specifically provides for the following:

Supervision.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Viewpoint: Preemption Authorized for State Banks, Too
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.