Am. Community Bankers v. Fed. Deposit Ins.

• Decision Date: 18 January 2000
• Docket Number: No. 99-5028,99-5028
• Citation: 200 F.3d 822
• Parties: (D.C. Cir. 2000) America's Community Bankers, Appellant v. Federal Deposit Insurance Corporation, Appellee
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 822

200 F.3d 822 (D.C. Cir. 2000)

America's Community Bankers, Appellant v. Federal Deposit Insurance Corporation, Appellee

No. 99-5028

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 19, 1999

Decided January 18, 2000

Appeal from the United States District Court for the District of Columbia(No. 97cv00416)

H. Stephen Harris, Jr., argued the cause for appellant. With him on the briefs was Philip R. Stein.

Thomas L. Holzman, Counsel, Federal Deposit Insurance Corporation, argued the cause for appellee. With him on the brief were Jack D. Smith, Deputy General Counsel, Ann S. Duross and Thomas A. Schulz, Assistant General Counsel, and Robert D. McGillicuddy and Barbara Sarshik, Counsel.

Before: Sentelle, Henderson and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge:

America's Community Bankers (Bankers), a trade association of banks and savings institutions, appeals from a district court order granting summary judgment for the Federal Deposit Insurance Corporation (FDIC) in an action challenging the results of an FDIC rulemaking undertaken in response to the Deposit Insurance Funds Act of 1996 (the Act or the 1996 Act). Reviewing the agency's rulemaking under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the district court upheld the FDIC's conclusions as a reasonable interpretation of the relevant statutes. Because we agree with the district court that the FDIC's interpretation of its governing statute is a reasonable one entitled to Chevron deference, we affirm the district court's decision.

I. Glossary

Because of the numerous acronyms and terms of art employed in this opinion, we provide a brief glossary.

                Bankers                         America's Community
                                                Bankers (Appellant)
                APA                         Administrative Procedure Act
                Bank Fund                       Bank Insurance Fund
                Act or 1996 Act             Deposit Insurance Funds Act of 1996
                FDIC                       Federal Deposit Insurance Corporation (Appellee)
                FICO                            Financing Corporation
                FIRREA                    Financial Institutions Reform, Re covery
                                                and Enforcement Act
                FSLIC                     Federal Savings and Loan Insurance Corporation
                Savings Fund              Savings Association Insurance Fund
                                                II. Background
                

In 1987, in an effort to stem a crisis in the savings and loan industry, Congress established the Financing Corporation (FICO) and authorized it to issue and service bonds for the purpose of recapitalizing and stabilizing the insolvent Federal Savings and Loan Insurance Corporation (FSLIC). See Federal Savings and Loan Insurance Corporation Recapitalization Act of 1987, Pub. L. No. 100-86, 302, 101 Stat. 552, 585 (1987); see also 12 U.S.C. 1441 (1994) (current version at 12 U.S.C.A. 1441 (West Supp. 1999)); Marirose K. Lescher & Merwin A. Mace III, Financing the Bailout of the Thrift Crisis: Workings of the Financing Corporation and the Resolution Funding Corporation, 46 Bus. Law. 507, 510 (1991) (discussing the establishment of FICO). The problems of the savings and loan industry failed to abate, however, so in 1989 Congress enacted more sweeping legislation to increase the supervisory authority of the FDIC and other regulatory agencies and to "reform, recapitalize, and consolidate" the federal deposit insurance system. Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. 183, 183 (1989) (FIRREA); see also How a Good Idea Went Wrong: Deregulation and the Savings and Loan Crisis, 47 Admin. L. Rev. 643, 656-58 (1995) (discussing the enactment of FIRREA). To accomplish the latter, FIRREA created two insurance funds under the administrative authority of the FDIC: the Savings Association Insurance Fund (Savings Fund) and the Bank Insurance Fund (Bank Fund). See FIRREA 206 (codified at 12 U.S.C. 1815). FIRREA also abolished the FSLIC, gave the Federal Housing Finance Board administrative authority over FICO, and shifted responsibility for the interest on FICO's bonds to Savings Fund member institutions. See id. 401(a), 512.

In further legislation, Congress ordered the FDIC to promulgate by regulation a schedule to assess Savings Fund member institutions semiannually to achieve by the year 2004 a designated 1.25% reserve-to-deposits capitalization ratio, then to set semiannual assessments to maintain reserves at that level. See Federal Deposit Insurance Corporation Improvement Act of 1991, Pub. L. No. 102-242, 302(a), 105 Stat. 2236, 2345 (1991) (codified as amended at 12 U.S.C. 1817(b) (West Supp. 1999)). The FDIC's governing statute instructed the FDIC Board, in setting the Savings Fund's assessments, to consider "(I) expected operating expenses, (II) case resolution expenditures and income, (III) the effect of assessments on members' earnings and capital, and (IV) any other factors that the Board of Directors may deem appropriate." 12 U.S.C.A. 1817(b)(2)(A)(ii) (West Supp. 1999).

Another section of that statute, 12 U.S.C. 1441(f)(2), also authorized FICO, "with the approval of the Board of Directors of the [FDIC]," to assess Savings Fund members to service FICO's bonds. 12 U.S.C. 1441(f)(2) (1994) (current version at 12 U.S.C.A. 1441(f)(2) (West Supp. 1999)). The same provision mandated that the sum of amounts assessed by FICO and by the Resolution Funding Corporation under 12 U.S.C. 1441b "shall not exceed the amount authorized to be assessed against [Savings Fund] members pursuant to [12 U.S.C. 1817];" and that FICO "shall have first priority to make the assessment." Id. 1441(f)(2)(A)-(B). Finally, 12 U.S.C. 1441(f)(2)(C) required the amount of the Savings Fund assessment under 12 U.S.C. 1817 to be reduced by the amount of the FICO and Resolution Funding Corporation assessments. See id. 1441(f)(2)(C). After FIRREA abolished the FSLIC in 1989, the FDIC collected the FICO assessments on FICO's behalf along with the Savings Fund assessments. Thus the pre-1996 statutory scheme linked FICO's bond interest funding to the Savings Fund's insurance premium assessment process and gave FICO funding the higher priority.

The Bank Fund achieved capitalization in May 1995, so the FDIC lowered the assessments of member institutions. See Lisa L. Bonner, Updating FDICIA/RTC, 15 Ann. Rev. Banking L. 81, 84-87 (1996) (describing the state of the insurance funds immediately prior to passage of the 1996 Act). In comparison, the Savings Fund remained significantly undercapitalized, and Savings Fund assessments remained high, because of the diversion of a portion of Savings Fund assessments to satisfy FICO's bond interest obligation. See id. Pursuing lower insurance fund assessments, Savings Fund member institutions sought to shift their deposits to the Bank Fund, and thus threatened to destabilize the Savings Fund and FICO's ability to pay its bond interest obligation. See J. Virgil Mattingly & Keiran J. Fallon, Understanding the Issues Raised by Financial Modernization, 2 N.C. Banking Inst. 25, 62-63 (1998) (discussing the enactment of the 1996 Act). To address this problem, Congress passed the 1996 Act, which the President signed into law on September 30, 1996. See id.

The Act ordered the FDIC to impose a special assessment sufficient to raise the Savings Fund to the 1.25% designated reserve ratio for the fourth quarter of 1996 as of October 1, 1996. See 1996 Act, Pub. L. No. 104-208, 2702, 110 Stat. 3009, 3009-479 (1996). The Act also amended 12 U.S.C. 1817(b)(2)(A)(i) to require that the FDIC make Savings Fund assessments "when necessary, and only to the extent necessary" to maintain Savings Fund reserves at the designated reserve ratio. 1996 Act 2708(a), 110 Stat. 3009-497 (codified at 12 U.S.C.A. 1817(b)(2)(A)(i) (West Supp. 1999)).Finally, effective January 1, 1997, the Act authorized FICO to service its bonds by assessing all insured depository institutions, not just Savings Fund member institutions; and in a related amendment, the Act eliminated the language in 12 U.S.C. 1441(f)(2) that linked the FICO and Savings Fund assessments. See 1996 Act 2703(a), 110 Stat. 3009-485 (codified at 12 U.S.C.A. 1441(f)(2) (West Supp. 1999)).

To summarize: As of October 1, 1996, the Savings Fund was fully capitalized at the designated reserve ratio. Thus, under 12 U.S.C. 1817(b)(2)(A)(i), the FDIC could only assess Savings Fund members to the extent necessary to maintain the Savings Fund at that level. Because the amendment to 12 U.S.C. 1441(f)(2) severing the statutory relationship between the Savings Fund and FICO did not become effective until January 1, 1997, however, FICO could only assess Savings Fund members to the extent authorized under 12 U.S.C. 1817 to cover its bond interest obligation for the fourth quarter of 1996.

On May 30, 1996, before the 1996 Act was enacted, FICO sent a memorandum to the FDIC requesting funding of $396,665,000 for the period of July 1 through December 31, 1996. On August 31, 1996, the FDIC sent invoices to the Savings Fund member institutions for the fourth quarter 1996 Savings Fund and FICO assessments. On September 30, 1996, the day the President signed the Act into law, the FDIC collected the fourth quarter Savings Fund and FICO assessments and transmitted to FICO its portion. On October 16, 1996, the FDIC issued a final rule imposing the special assessment ordered by the Act, to be collected on November 27, 1996. See 61 Fed. Reg. 53,834 (1996). Since the special assessment capitalized the Savings Fund retroactive to October 1, the FDIC also issued on October 16 a notice of proposed rulemaking to revise the fourth quarter assessment schedules so as to refund the fourth quarter Savings Fund assessment collected on September 30, 1996. See 61 Fed. Reg. 53,867 (1996) (proposed Oct. 16, 1996).

On December...