OCC Wins Another Case Involving A Wachovia Unit

By Davenport, Todd | American Banker, September 2, 2004 | Go to article overview

OCC Wins Another Case Involving A Wachovia Unit


Davenport, Todd, American Banker


Another federal judge has upheld the Office of the Comptroller of the Currency's contention that operating subsidiaries of national banks enjoy the same rights as the banks, but states are not convinced that the matter is settled.

Judge Robert Holmes Bell of the U.S. District Court for the Western District of Michigan sided with a Wachovia Bank subsidiary Monday in its case against Linda Watters, the commissioner of the Michigan Office of Insurance and Financial Services.

Wachovia Mortgage Co. notified Michigan officials in April 2002 that it would surrender its state mortgage license but continue to conduct mortgage business in the state. It argued that as a subsidiary of a national bank, it was subject to the OCC's visitorial rights generally, the power to examine operations and enforce laws.

The OCC's regulations interpreting the National Bank Act say, "State laws apply to national bank operating subsidiaries to the same extent that those laws apply to the parent national bank," and Judge Bell agreed.

"Although the State of Michigan maintains an interest in protecting its citizens, those compelling policy reasons do not undermine the reasonableness of the OCC's regulation," he wrote in a 13-page decision.

When congressional intent regarding a statute is ambiguous, courts generally give regulators broad interpretation authority, requiring only that the interpretation be reasonable.

Judge Bell also wrote that Michigan law purported to require Wachovia Mortgage to register, pay annual fees, file an annual financial statement, and submit to the commission's supervision.

"These requirements clearly interfere with its national bank powers to conduct the business of banking," he wrote. "Even the most limited aspects of state licensing requirements have been preempted, because they created impermissible conditions upon the authority of a national bank to do business."

The decision was similar to one in May by a federal judge in Connecticut, who ruled in favor of Wachovia against Connecticut Banking Commissioner John Burke. Last year a judge in California reached a similar conclusion. …

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