NATIONAL COUNCIL OF SAV. INSTITUTIONS v. FDIC, Civ. A. No. 85-1451.

CourtUnited States District Courts. United States District Court (Columbia)
Writing for the CourtTheodore C. Hirt, Dept. Justice, Civil Div., Washington, D.C., for defendant
Citation664 F. Supp. 572
PartiesNATIONAL COUNCIL OF SAVINGS INSTITUTIONS, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant.
Docket NumberCiv. A. No. 85-1451.
Decision Date06 May 1987

664 F. Supp. 572

NATIONAL COUNCIL OF SAVINGS INSTITUTIONS, Plaintiff,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant.

Civ. A. No. 85-1451.

United States District Court, District of Columbia.

May 6, 1987.


664 F. Supp. 573

John D. Hawke, Jr., Arnold & Porter, Washington, D.C., for plaintiff.

Theodore C. Hirt, Dept. Justice, Civil Div., Washington, D.C., for defendant.

MEMORANDUM AND ORDER

JACKSON, District Judge.

This case presents a challenge from another quarter to certain regulations promulgated by the Federal Deposit Insurance Corporation ("FDIC") respecting the proper relationship between FDIC-insured banks and their securities-dealing "subsidiaries" or "affiliates" which were also the subject of the controversy in Investment Company Institute v. Federal Deposit Insurance Corporation, 815 F.2d 1540 (D.C. Cir.1987) (per curiam) ("ICI").

In ICI the U.S. Court of Appeals for the District of Columbia Circuit upheld the regulations substantively (as had the district court) against a claim by trade associations of mutual fund companies and investment bankers, i.e., potential competitors of the subsidiary/affiliates, that, to the extent the regulations purported to sanction the securities businesses of subsidiaries or affiliates of FDIC-insured "nonmember" (i.e., nonmembers of the Federal Reserve System) banks at all, the regulations contravened Section 21 of the Banking Act of 1933 (the Glass-Steagall Act, 12 U.S.C. § 378 (1982)) which generally prohibits investment banks and securities dealers from engaging in the commercial banking business and vice versa. Here, National Council of Savings Institutions ("NCSI"), a trade association representing approximately 273 FDIC-insured savings banks, including 27 now holding federal charters (and an undetermined number of existing state banks that might apply for them), complains that the regulations exceed FDIC's statutory authority in another respect: they constitute, in effect, "regulation" of the business of those "nonmember" savings banks with federal charters which Congress has committed to another agency, the Federal Home Loan Bank Board ("FHLBB").1 The FDIC contends that plaintiff is without "standing" to maintain the action (but only in the sense that the dispute is not "ripe," no FDIC-insured savings bank having yet sought to enter the securities business via a subsidiary or affiliate)2, and that the regulations are in any event a necessary incident of its power to terminate a bank's insurance coverage to protect its insurance fund from unsafe and unsound banking practices under Section 28(a) of the Federal Deposit Insurance Act of 1933, 12 U.S.C. § 1818(a). The case is now before the Court on the parties' cross-motions for summary judgment. The Court finds the reasoning of the court of appeals in ICI to be apposite to

664 F. Supp. 574
the disposition of both issues, albeit by adaption, and concludes for the following reasons that judgment must be given for defendant

As to NCSI's "standing" here, the Court observes that in ICI the court of appeals held an association-representative of prospective competitors of the savings banks' securities-dealing subsidiaries and affiliates to have standing to challenge the regulations (on the ground that they were more permissive than law allowed), because its constituents would suffer competitive injury if and when the savings banks availed themselves of them. Although the court of appeals did not address the issue in terms of "ripeness," a necessary corollary of ICI's standing there is that the association-representative of the savings banks with whose subsidiaries and affiliates ICI's constituents may eventually be competing (and who would be directly affected by the regulations by having to comply with them to enter the competition),3 must also have standing to challenge the regulations (as too constraining), even if none has as yet undertaken to do so.

On the merits, ICI is also instructive. The regulations promulgated by the FDIC purport to prescribe the manner in which all "nonmember" FDIC-insured banks (including the federally chartered savings banks under the FHLBB's regulatory control) may engage in securities business activities through...

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2 practice notes
  • Meetings: Petition for Rulemaking to Preempt Certain State Laws; public hearing,
    • United States
    • Federal Register March 21, 2005
    • March 21, 2005
    ...the FDI Act vests the FDIC with authority to address these issues.\11\ \10\ See, e.g., National Council of Savings Institutions v. FDIC, 664 F.Supp. 572 (D.D.C. 1987) (sustaining FDIC regulation governing the proper relationship between FDIC-insured banks and their securities-dealing ``subs......
  • Insured State banks and savings associations; activities,
    • United States
    • Federal Register December 01, 1998
    • December 1, 1998
    ...and (2) regulations were within authority of FDIC. National Council of Savings Institutions v. Federal Deposit Insurance Corporation, 664 F.Supp. 572 (D.C. Section 337.4 is structured to ensure the separateness of the subsidiary and the bank. This separation is necessary as the bank would b......

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