Otero Savings and Loan Ass'n v. Federal Home Loan Bank Bd.

• Decision Date: 13 November 1981
• Docket Number: No. 80-2346,80-2346
• Citation: 665 F.2d 279
• Parties: OTERO SAVINGS AND LOAN ASSOCIATION, a Colorado corporation, Petitioner, v. FEDERAL HOME LOAN BANK BOARD and Federal Savings and Loan Insurance Corporation, Respondents.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 279

665 F.2d 279

OTERO SAVINGS AND LOAN ASSOCIATION, a Colorado corporation, Petitioner, v. FEDERAL HOME LOAN BANK BOARD and Federal Savings and Loan

Insurance Corporation, Respondents.

No. 80-2346.

United States Court of Appeals, Tenth Circuit.

Argued and Submitted Feb. 17, 1981.

Decided Nov. 13, 1981.

Bruce D. Pringle of Baker & Hostetler, Denver, Colo. (James A. Clark of Baker & Hostetler, Denver, Colo., Gailor, Elias & Matz, Washington, D. C., and Law, Scheid & Farabee, Denver, Colo., were also on the brief), for petitioner.

Rosemary Stewart, Trial Atty., Office of the Gen. Counsel, Washington, D. C. (Ralph W. Christy, Senior Associate Gen. Counsel, Larry M. Berkow and Harvey Simon, Associate Gen. Counsel, Federal Home Loan Bank Board, Washington, D. C., were also on the brief), for respondents.

Before HOLLOWAY, McKAY and LOGAN, Circuit Judges. ^*

Otero Savings and Loan Association (Otero) petitions for review of an order of the Federal Savings and Loan Insurance Corporation (FSLIC) and the Federal Home Loan Bank Board (Bank Board) finding that Otero's "Check-In" program, as operated prior to December 31, 1980, violated 12 U.S.C. § 1832(a). The order directed Otero to close all checking accounts held by for-profit corporations and partnerships and to cease offering new customer Check-In or related automatic transfer system accounts (ATS) or negotiable orders of withdrawal (NOW) accounts for a period of 268 days following the effective date of the order. On appeal, Otero contends it has not violated § 1832 and argues that respondents have no power, in any event, to grant the type of relief encompassed by the order. A panel of this Court granted a temporary stay of the respondents' order pending our decision; at the time of oral argument we continued that stay.

Otero is a Colorado state-chartered savings and loan association. In April 1980 it began the operation of a checking account service known as the "Check-In" program. Essentially this is an arrangement under which a customer opens two accounts, an interest bearing savings account and a noninterest bearing checking account. When the customer writes a check, an amount equivalent to the check is automatically transferred from the savings account to the checking account pursuant to a "savings to checking transfer agreement." It is contemplated that the normal balance in the checking account will be zero.

The FSLIC instituted an administrative proceeding against Otero pursuant to 12 U.S.C. § 1730(e) (1980) which culminated in the Bank Board's decision that the operation of Otero's Check-In program before December 31, 1980, violated 12 U.S.C. § 1832, although it would be legal to offer such accounts to depositors other than for-profit corporations and partnerships after December 31, 1980. ¹ The Bank Board, claiming authority under 12 U.S.C. § 1730(e) (1980), entered an order permitting Otero to maintain its existing Check-In accounts, except for those held by for-profit organizations, but directing Otero to cease opening any new Check-In or equivalent accounts for a period of 268 days following the effective date of the order. This penalty was conceived to be the most equitable under the circumstances, since Otero had achieved a 268 day competitive advantage by offering such accounts before being permitted to do so by law.

I

LOGAN, Circuit Judge:

THE LEGALITY OF OTERO'S CHECK-IN PROGRAM UNDER 12 U.S.C. §

1832

Because its accounts are insured by the FSLIC, Otero is deemed an "insured institution" within the meaning of 12 U.S.C. § 1724, and is therefore a "depository institution" by definition under 12 U.S.C. § 1832(b)(5). As such, Otero is subject to § 1832(a), which provides:

(a) No depository institution shall allow the owner of a deposit or account on which interest or dividends are paid to make withdrawals by negotiable or transferable instruments for the purpose of making transfers to third parties, except that such withdrawals may be made in the States of Massachusetts, Connecticut, Rhode Island, Maine, Vermont, New York, New Jersey, and New Hampshire.

Otero argues that its two-account ATS system does not violate 12 U.S.C. § 1832(a), reading that section as applying only to NOW accounts, that is, single account systems in which interest or dividends are paid directly upon savings accounts from which withdrawals by negotiable instruments are permitted.

We believe a fair reading of the language of 12 U.S.C. § 1832(a) indicates that no depository institution may offer an interest bearing demand deposit account, whether operated directly as a one-account NOW system or indirectly as a two-account ATS system. The statutory language is broad enough to apply to both types of accounts. We have found nothing in the legislative history of this provision, enacted in 1973, to indicate that Congress intended to differentiate between the two types of accounts. It is true that Congress treated ATS and NOW systems separately in later legislation. But the legislative history of subsequent acts is of dubious value in interpreting an act passed six years earlier. See Haynes v. United States, 390 U.S. 85, 87 n.4, 88 S.Ct. 722, 725 n.4, 19 L.Ed.2d 923 (1968); United States v. Price, 361 U.S. 304, 313, 80 S.Ct. 326, 331, 4 L.Ed.2d 334 (1960); United States v. United Mine Workers, 330 U.S. 258, 282, 67 S.Ct. 677, 690, 91 L.Ed. 884 (1947).

It is also a fact that the congressional reports treating the original enactment of 12 U.S.C. § 1832 refer only to NOW accounts, and it may be, as represented to us at oral argument, that no savings and loan was using anything but NOW accounts at the time of that legislation. No doubt the NOW account development in New England and the threat of competitive inequality between savings and loan associations and commercial banks was the impetus to congressional action. This does not, however, limit the general language of § 1832 which we construe as forbidding depositor withdrawals from interest bearing accounts via negotiable or transferable instruments payable to third parties, whether accomplished directly under the NOW format or indirectly under the ATS format.

Otero's strongest argument focuses on the interrelationship between 12 U.S.C. §§ 371a and 1832(a) after 1979 legislation. It argues that § 1832(a) must not be read to prohibit ATS accounts because such an interpretation would nullify the 1979 amendments to § 371a. The 1979 amendments expressly allow member banks to offer ATS accounts after December 31, 1979, while § 1832(a) prohibits all depository institutions from offering such accounts until after December 31, 1980. ² Thus, Otero contends we must reject the broad reading of section 1832 to avoid rendering a legislative enactment a nullity. See F.T.C. v. Manager, Retail Credit Co., 515 F.2d 988, 994 (D.C.Cir.1975); General Motors Acceptance Corp. v. Whisnant, 387 F.2d 774 (5th Cir. 1968); Abbot v. Bralove, 176 F.2d 64 (D.C.Cir.1949).

We find no fatal inconsistency between section 371a, as amended, and the broad reading of section 1832, however. The general language in section 1832, prohibiting any depository institution from offering interest bearing demand deposit accounts or their equivalents, either NOW or ATS accounts, must give way to the specific language of section 371a, granting federal reserve member banks authority to offer ATS accounts after December 31, 1979. See Busic v. United States, 446 U.S. 398, 100 S.Ct. 1747, 64 L.Ed.2d 381; Morton v. Mancari, 417 U.S. 535, 94 S.Ct. 2474, 41 L.Ed.2d 290 (1974). The legislative history of the Depository Institutions Deregulation Act of 1980 offers no explanation for Congress' disparate treatment of granting federal reserve member banks ATS privileges one year earlier than all other federally insured depository institutions. The underlying policy reasons for granting member banks a one year head start do not concern us.

At oral argument no constitutional arguments were made against the application of 12 U.S.C. § 1832 to this Colorado-based savings and loan association. Such arguments were made to the Bank Board, however, in administrative proceedings and in briefs filed there, and the constitutional issue was treated in the Bank Board's decision. Any constitutional argument must be based upon the exception provided for eight northeastern states from the prohibitions in 12 U.S.C. § 1832, or the inconsistency between the treatment of commercial banks and savings and loan associations during 1980. We agree with the Bank Board that the governing principle is stated in New Orleans v. Dukes, 427 U.S. 297, 303, 96 S.Ct. 2513, 2516, 49 L.Ed.2d 511 (1976); a rational basis classification test is applicable. Here there is no inherently suspect classification, nor is a fundamental interest involved; this is solely an economic regulation governing financial institutions. Congress has undisputed authority to legislate in this area and may make reasonable distinctions between its treatment of commercial banks and savings and loans. It may also experiment by allowing particular types of accounts in one region of the country before extending the rule to others. We think there is no constitutional problem here.

Thus we hold 12 U.S.C. § 1832(a) applies to prohibit Otero's "Check-In" ATS type account during 1980, and that section is constitutional.

II

HOLLOWAY, Circuit Judge:

THE VALIDITY OF THE REMEDIAL ORDER OF THE BANK BOARD

Two issues are presented by the challenges to the remedial order of the Federal Home Loan Bank Board: (1) whether the Bank Board has power to enforce 12 U.S.C. § 1832 by orders entered in cease and desist proceedings brought under 12 U.S.C. § 1730(e)(1); and (2) whether the remedial order, particularly the two hundred sixty-eight day ban on the opening of new Check-In accounts, NOW accounts or similar programs by Otero, is within the scope of the Bank Board's powers.

A

The FSLIC's power to enforce § 1832

The Bank Board argues that it may enforce §...