American Ins. Ass'n v. Clarke

• Citation: 865 F.2d 278
• Decision Date: 06 January 1989
• Docket Number: No. 87-5128,87-5128
• Parties: , 57 USLW 2405 AMERICAN INSURANCE ASSOCIATION, Appellant, v. Robert L. CLARKE, Comptroller of the Currency, et al.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 278

865 F.2d 278

275 U.S.App.D.C. 59, 57 USLW 2405

AMERICAN INSURANCE ASSOCIATION, Appellant, v. Robert L. CLARKE, Comptroller of the Currency, et al.

No. 87-5128.

United States Court of Appeals, District of Columbia Circuit.

Argued Jan. 26, 1988.

Decided Aug. 23, 1988.

Opinion on Rehearing Jan. 6, 1989.

Appeal from the United States District Court for the District of Columbia (D.C.Civil No. 85-1489).

William L. Patton, with whom Martin E. Lybecker and Alan G. Priest, Washington, D.C., were on the brief, for appellant.

Barbara C. Biddle, Atty. Dept. of Justice, with whom Richard K. Willard, Asst. Atty. Gen. at the time the brief was filed, Joseph E. diGenova, U.S. Atty. at the time the brief was filed, Anthony J. Steinmeyer, Atty., Dept. of Justice, L. Robert Griffin, and Mark Leemon, Attys., Office of Comptroller of the Currency, Washington, D.C., were on the brief, for federal appellees.

Arnold M. Lerman, with whom Christopher R. Lipsett, Kerry W. Kircher, and Murray A. Indick, Washington, D.C., were on the brief, for appellee Citibank, N.A.

Jamie S. Gorelick and Jonathan B. Sallet, Washington, D.C., were on the brief for Independent Ins. Agents of America, Inc., et al., amici curiae urging reversal.

John R. Bolton, Asst. Atty. Gen., Mark Sullivan III, Gen. Counsel, Dept. of Treasury, Jay B. Stephens, U.S. Atty., Paul A. Schott, Chief Counsel, Office of the Comptroller of the Currency, and Anthony J. Steinmeyer, and John F. Daly, Attys., Dept. of Justice, were on the supplemental brief on rehearing for federal appellees.

Arnold M. Lerman, Christopher R. Lipsett, and Murray A. Indick were on the supplemental brief on rehearing for appellee Citibank, N.A.

Martin E. Lybecker, William A. Patton, and Alan G. Priest were on the supplemental brief on rehearing for appellant.

Jonathan B. Sallet was on the supplemental brief on rehearing for amici curiae Independent Insurance Agents of America, Inc., et al.

John J. Gill, Gen. Counsel, and Michael F. Crotty, Associate Gen. Counsel (American Bankers Ass'n), and Ernest Gellhorn, David W. Roderer, Robert C. Jones (Conference of State Bank Supervisors), and Leonard J. Rubin (Independent Bankers Ass'n of America) were on the joint amici curiae brief on rehearing for Conference of State Bank Supervisors, et al.

Before EDWARDS, BUCKLEY, and SENTELLE, Circuit Judges.

Opinion for the court filed by Circuit Judge BUCKLEY.

BUCKLEY, Circuit Judge:

The American Insurance Association appeals from a summary judgment entered by the district court. Appellant challenges the Comptroller of the Currency's concurrence in a proposal by Citibank to form a subsidiary to offer municipal bond insurance. We affirm the district court's rejection of appellant's claim that the Comptroller's action violates the National Bank Act, but we reverse the court's dismissal of appellant's challenge under the Bank Holding Company Act.

I. BACKGROUND

Citibank, N.A. ("Citibank"), a national bank chartered under 12 U.S.C. Sec. 21 (1982), is a wholly-owned subsidiary of Citicorp, a registered bank holding company. On January 30, 1985, Citibank notified the Comptroller of the Currency ("Comptroller") under 12 C.F.R. Sec. 5.34(d)(1) (1988) of its intention to establish a subsidiary to offer municipal bond insurance. As Citibank's subsidiary, the American Municipal Bond Assurance Corporation ("AMBAC") is subject to the same restrictions applicable to national banks. 12 C.F.R. Sec. 5.34(d)(2)(i) (1988).

The service offered by AMBAC under Citibank's proposal would operate as follows. A municipality wishing to issue bonds would apply to AMBAC for insurance. (We will refer to AMBAC's service as "insurance" without deciding whether it meets the legal criteria for insurance under various regulatory schemes.) After engaging in a traditional credit analysis (determining the ability of the issuer to satisfy the claims in the event of default), AMBAC would offer the insurance in the form of a "standby credit." If the issuer defaults, the bondholders would present documentary proof of nonpayment to AMBAC, which would pay the interest and principal due the bondholders. AMBAC would then be subrogated to the rights of the bondholders against the issuer.

The purpose of this arrangement is to reduce the issuer's costs of borrowing. As potential bond purchasers may be unfamiliar with the creditworthiness of particular municipal issuers, the market price for uninsured bonds would reflect a risk premium, resulting in an inflated interest rate. The bank, which is more familiar with the issuer's creditworthiness, can substitute its own more widely known credit for the issuer's, thus reducing the cost of borrowing by bridging the information gap.

The Comptroller concurred in Citibank's proposal, concluding that AMBAC's activities were permissible under the National Bank Act ("NBA") (codified in scattered sections of U.S.C., see note following 12 U.S.C. Sec. 38 (1982)), and the Bank Holding Company Act ("BHCA"), 12 U.S.C. Secs. 1841-50 (1982). See Interpretive Letter No. 338, [1985-1987 Transfer Binder] Fed. Banking L. Rep. (CCH) p 77,791 (May 2, 1985). AMBAC began operations shortly thereafter. The American Insurance Association ("AIA"), a trade group representing property and casualty insurance companies, then repaired to the district court, seeking declaratory and injunctive relief to set aside the Comptroller's order. Citibank intervened as a party defendant. The district court eventually entered summary judgment for the Comptroller, American Ins. Ass'n v. Clarke, 656 F.Supp. 404 (D.D.C.1987), and the AIA appealed.

II. DISCUSSION

A. Standard of Review

The Supreme Court recently reaffirmed that the principles concerning judicial deference to an agency's interpretation of its The same cannot be said for the Comptroller's interpretation of the BHCA. As we discuss at greater length below at 284-285, the Board of Governors of the Federal Reserve System has exclusive jurisdiction to interpret and apply the BHCA. See generally Whitney Nat'l Bank v. Bank of New Orleans & Trust Co., 379 U.S. 411, 419, 85 S.Ct. 551, 556-57, 13 L.Ed.2d 386 (1965). Chevron does not apply in this situation: "[W]hen an agency interprets a statute other than that which it has been entrusted to administer, its interpretation is not entitled to deference." Department of the Treasury v. FLRA, 837 F.2d 1163, 1167 (D.C.Cir.1988), and cases cited.

                governing statute apply to the Comptroller's interpretation of the NBA.  Clarke v. Securities Indus. Ass'n, 479 U.S. 388, 107 S.Ct. 750, 759, 93 L.Ed.2d 757 (1987).  Those principles, of course, were outlined by Chevron, U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837, 842-45, 104 S.Ct. 2778, 2781-83, 81 L.Ed.2d 694 (1984).  If Congress has spoken directly to the precise question at issue, we must enforce that unambiguously expressed intent.  Id. at 842-43, 104 S.Ct. at 2781-82.    If congressional intent is unclear, however, we will defer to the agency's permissible construction, id. at 843, 104 S.Ct. at 2781-82, i.e., one that is "rational and consistent with the statute."    NLRB v. United Food & Commercial Workers Union, Local 23, --- U.S. ----, 108 S.Ct. 413, 421, 98 L.Ed.2d 429 (1987)
                

We are situated no differently than the district court in making these determinations. "Because an award of summary judgment reflects 'a determination of law rather than fact,' we do not defer to the District Court's conclusions but consider the matter de novo." Nepera Chem., Inc. v. Sea-Land Serv., Inc., 794 F.2d 688, 699 (D.C.Cir.1986) (footnote omitted).

B. National Bank Act

Appellant first argues that the Comptroller's approval of the Citibank proposal violates the NBA. As the NBA does not specifically prohibit AMBAC's municipal bond insurance, congressional intent is unclear, and we will defer to the Comptroller's decision if it is rational and consistent with the statute.

Under 12 U.S.C. Sec. 24 (Seventh) (1982 & Supp. IV 1986), a national bank has

all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes according to the provision of title 62 of the Revised Statutes.

Appellant argues that a bank may engage only in those activities specifically mentioned and others incident (i.e., convenient or useful) to the expressly authorized activities. Brief for Appellant at 28-29.

We agree with the district court, however, that this reflects "a narrow and artificially rigid view of both the business of banking and the [NBA]." 656 F.Supp. at 408. Rather than attempt to correlate municipal bond insurance to a specific power mentioned in section 24 (Seventh), the Comptroller focused on the essence of AMBAC's service: the provision of credit. We agree with the district court that

the business of banking involves the substitution of the "[bank's] own credit, which has general acceptance in the business community, for the individual's credit, which has only limited acceptability.... It is the end for which a bank exists." Indeed, the extension of credit on both a secured and unsecured basis is such a long-standing practice under the [NBA] that credit is today viewed as one of "[t]he principal banking 'products.' " Banks provide this "product" in a variety of forms not specifically enumerated in the [NBA]: they offer irrevocable lines of credit, standby and mercantile letters of credit, and check guaranty and credit card programs. See e.g., 12 C.F.R. Secs. 7.7017, 7.7016, 7.378, 32.3 (1985).

656 F.Supp. at 408 (citations omitted; ellipsis original).

We do not think the Comptroller acted irrationally in concluding that AMBAC's To understand the Comptroller's comparison of AMBAC's standby credits with standby letters of credit, w...