Conference of Federal Sav. & Loan Associations v. Stein
| Decision Date | 26 September 1979 |
| Docket Number | No. 78-3201,78-3201 |
| Citation | 604 F.2d 1256 |
| Parties | CONFERENCE OF FEDERAL SAVINGS AND LOAN ASSOCIATIONS, a California Corporation, and Alameda Federal Savings and Loan Association, Bay View Federal Savings and Loan Association, California Federal Savings and Loan Association, Coast Federal Savings and Loan Association, Eureka Federal Savings and Loan Association, First Federal Savings and Loan Association of San Diego, First Federal Savings and Loan Association of Santa Monica, First Federal Savings and Loan Association of South Pasadena, Home Federal Savings and Loan Association of San Diego, Orange Belt Federal Savings and Loan Association, Pacific Federal Savings and Loan Association, Peoples Federal Savings and Loan Association, Pomona First Federal Savings and Loan Association, Provident Federal Savings and Loan Association of Riverside, Redlands Federal Savings and Loan Association, Republic Federal Savings and Loan Association, San Francisco Federal Savings and Loan Association, Santa Fe Federal Savings and Loan Assn. v. Alan L. STEIN, Successor in Office to Richard T. Silberman, as Secretary of the Business and Transportation Agency of the State of California, Defendant- Appellant. FEDERAL HOME LOAN BANK BOARD, Cross Claimant-Appellee, v. Alan L. STEIN, etc., Cross Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
George Deukmejian, Atty. Gen., Arthur C. deGoede, Asst. Atty. Gen., Joseph H. O'Heron, W. Gary Kurtz, Deputy Attys. Gen., Richard M. Mosk (argued), Los Angeles, Cal., for defendant-appellant.
McKenna & Fitting, Williaam F. McKenna, Aaron M. Peck (argued), G. Howden Fraser, Terry O. Kelly, Los Angeles, Cal., argued, for plaintiffs-appellees.
Jack Greenberg (argued), Beth, J. Lief, Eric Schnapper, Attys. N.A.A.C.P. Legal Defense and Education Fund, Inc., Amicus Curiae.
Anse P. Jones, Gen. Counsel, Harold B. Shore, Associate Gen. Counsel, Harvey Simon, Asst. Gen. Counsel (argued), Steven J. Toll, for Federal Home Loan Bank Bd.
On Appeal from the United States District Court for the Eastern District of California.
Before MERRILL and HUG, Circuit Judges, and PORT, * District Judge.
The question presented on this appeal is whether the appellant, Secretary of the Business and Transportation Agency of the State of California, has power to regulate federal savings and loan associations under California's Housing Financial Discrimination Act of 1977, Cal.Health & Safety Code §§ 35800 Et seq. (the Act). The district court held that he has not. It adjudged that "the (Federal Home Loan) Bank Board's exercise of its plenary regulatory power granted by Congress under (the Home Owners' Loan Act) preempts legislation by the State of California which attempts to subject federal savings and loan associations in California to state regulation and discipline in the area of anti-redlining practices." We affirm.
The Home Owners' Loan Act of 1933, 12 U.S.C. §§ 1461 Et seq. (HOLA), was the result of congressional dissatisfaction with state law and practice in the financing of home construction. The first federal effort was through the Home Loan Bank Act of 1932. This failed to attack the problem satisfactorily. By 1933, 40 percent of all home loans in the United States were in default. Under date of April 13, 1933, President Roosevelt wrote the Congress:
"I ask the Congress for legislation to protect small home-owners from foreclosure and relieve them of a portion of the burden of excessive interest and principal payments incurred during the period of higher values and higher earning power."
H.R.Doc. No. 19, 73d Cong., 1st Sess. 1618, 1702 (1933).
The result was HOLA, a radical and comprehensive response to the inadequacies of the existing state systems. A Federal savings and loan system was created. The Federal Home Loan Bank Board (the Bank Board) was created with extremely broad powers to promulgate rules and regulations. 12 U.S.C. § 1464(a) provides in part:
"In order to provide local mutual thrift institutions in which people may invest their funds and in order to provide for the financing of homes, the Board is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as 'Federal Savings and Loan Associations' * * * and to issue charters therefor, giving primary consideration to the best practices of local mutual thrift and home-financing institutions in the United States."
With reference to HOLA, one writer has stated:
" * * * the states had developed a hodgepodge of savings and loan laws and regulations, and Congress hoped that FHLBB rules would set an example for uniform and sound savings and loan regulations."
T. Marvell, The Federal Home Loan Bank Board, p. 26 (1969).
Pursuant to its authority, the Bank Board has promulgated regulations comprehensively dealing with the creation and operation of federal savings and loan associations. They deal with the manner in which capital may be raised by a federal association, earnings distributed, and withdrawals effectuated. See 12 C.F.R. §§ 545.1-.4. The powers of a federal savings and loan association to borrow, give security, issue notes, bonds, debentures or obligations are prescribed and authorized. 12 U.S.C. § 1464(b)(2). The authority of a federal association to make and purchase loans and otherwise invest in real estate is subject to regulation. 12 U.S.C. § 1464(c); 12 C.F.R. § 545.6.
In recent years the Congress, in various civil rights statutes, has directed its attention to specific problems of borrowers relating to discrimination in the extending of credit and granting of loans. Title VIII of the Civil Rights Act of 1968, 42 U.S.C. §§ 3601 Et seq.; The Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691 et seq.; The Home Mortgage Disclosure Act (HMDA), 12 U.S.C. §§ 2801 Et seq. Language in these acts and in their legislative histories indicates a congressional intent that they shall not result in federal pre-emption of similar rights granted by state statutes. For example, ECOA states in part:
15 U.S.C. § 1691d(f). The legislative history of ECOA contains a congressional statement to the following effect:
"The Committee intends that those state laws which give greater protection to the applicant, as determined by the Board, shall apply equally to all credit granting institutions doing business in that state."
1976 U.S.Code Cong. & Admin.News, pp. 403, 414.
All of these acts provide the Bank Board with authority to promulgate rules and regulations prohibiting discrimination.
Pursuant to this authority regulations have been adopted by the Bank Board. They prohibit discrimination on the basis of race, color, religion and sex, and also prohibit red-lining credit discrimination based on the characteristics of the neighborhood surrounding the borrower's dwelling. The regulations provide for monitoring of federal savings and loan associations by the Bank Board and establish an enforcement mechanism and require posting of notices in a prescribed form.
California's Housing Financial Discrimination Act of 1977 contains provisions prohibiting discrimination in lending "due * * * to the consideration of race, color, religion sex, marital status, national origin, or ancestry" of the borrower, Cal.Health & Safety Code § 35811, or "due * * * to the consideration of conditions * * * in the neighborhood or geographic area surrounding the housing accommodation" of the borrower, Id. § 35810 (). The Act also provides: "The secretary (of the Business and Transportation Agency) * * * shall monitor and investigate the lending patterns and practices of financial institutions for compliance * * *." Id. at § 35815. The Act provides procedures for the resolution of complaints. Complaints may be filed with the Secretary by aggrieved applicants and the Secretary shall determine whether a violation has occurred, shall make findings, may issue cease and desist orders and impose penalties, all subject to judicial review. Id. §§ 35820-23. Notices in a prescribed form are required to be posted advising loan applicants of their rights and where complaints may be filed. Id. § 35830.
After passage of the state act, appellant, by directive of December 15, 1977, notified all lending institutions operating in California, including federal savings and loan associations, that they would be required to abide by the provisions of the Act. The Federal Home Loan Bank Board responded with an opinion that the state act did not apply to federal savings and loan associations. On ...
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