Clarke v. Securities Industry Assn.

Justice Stevens,

with whom The Chief Justice and Justice O’Connor join, concurring in part and concurring in the judgment.

Analysis of the purposes of the branching limitations on national banks demonstrates that respondent is well within the “zone of interest” as that test has been applied in our *410 prior decisions. Because I believe that these cases call for no more than a straightforward application of those prior precedents, I do not join Part II of the Court’s opinion, which, in my view, engages in a wholly unnecessary exegesis on the “zone of interest” test. I do join the remainder of the Court’s opinion, which upholds the Comptroller of the Currency’s interpretation of the McFadden Act.

Petitioners’ argument that respondent lacks standing to challenge the Comptroller’s decision in these cases is predicated on their reading of the purpose behind the branching limitations of the McFadden Act. They argue that Congress’ only concern in not allowing national banks to maintain more branches than their state counterparts may maintain under state law was to ensure that the national banks not use their newly granted branching authority to gain a competitive edge over state banks. 1 Close examination of the Act and its history, however, convinces me that this was not the only purpose of the branching restrictions. Rather, the McFadden Act was in large part a compromise in which Congress started from a general antibranching rule and created a limited exception just large enough to allow national banks to compete effectively with state banks, but also narrow enough to continue to serve the policy of exercising control on the financial power of national banks. The general policy against branching was based in part on a concern about the national banks’ potential for becoming massive financial institutions that would establish monopolies on financial services. Petitioners’ “zone of interest” argument is therefore predicated on too narrow a reading of the statutory purposes, and hence too narrow a view of the applicable zone of interest that the broad legislative scheme sought to protect.

The National Currency Act of 1863, 12 Stat. 665 , and the National Bank Act of 1864, ch. 106, 13 Stat. 99 , which provided, inter alia, for federal chartering of national banks, *411 ended the 57-year hiatus during which there was no federal involvement in banking. The National Bank Act in Rev. Stat. § 5190 provided that “[t]he usual business of each national banking association shall be transacted at an office or banking-house located in the place specified in its organization certificate,” 2 and in 1902 the Comptroller of the Currency stated his view that this statute prohibited national banks from branching. See Annual Report of the Comptroller of the Currency, H. R. Doc. No. 10, Vol. 2, 72d Cong., 2d Sess., 45-47 (1902). In 1911 the Attorney General issued an opinion affirming that view. He explained that neither the statute nor national banks’ inherent powers gave them the legal authority to establish branches. Lowry National Bank, 29 Op. Atty. Gen. 81, approved in First National Bank in St. Louis v. Missouri, 263 U. S. 640, 656-659 (1924).

By the early 1900’s, some States, most notably California, had begun to authorize their state banks to branch. See J. Chapman & R. Westerfield, Branch Banking 84-92 (1980 reprint); G. Cartinhour & R. Westerfield, Branch, Group and Chain Banking and Historical Survey of Branch Banking in the United States 195-215 (1980 reprint). Controversy soon began to brew over the prohibition on national banks’ branching. See Chapman & Westerfield, supra, at 92-102. Many argued that it was restraining the national banks too much; not only was it having the salutary effect of preventing the national banks from overpowering other institutions, but it was also having the negative effect of threatening the national banks’ vitality by not allowing them to compete fairly with their state counterparts. Others argued that branching was inherently evil and dangerous, and that Congress should certainly not allow national banks to branch, even though Congress might not be able to prohibit States from allowing their banks to engage in branching. See generally C. Col *412 lins, The Branch Banking Question 2-16 (1926); S. South-worth, Branch Banking in the United States 163-184 (1928).

Congress began to focus on the branch banking issue in 1922, when the Comptroller of the Currency called for legislative action to reduce the competitive disparity. The next five years saw extensive legislative debate on the branch banking crisis and the optimum way to deal with it. See generally Collins, supra, at 82-110. As Justice White explains, ante, at 401-402, the legislation that was eventually passed in 1927, the McFadden Act, reflected a compromise between these factions. On the one hand, the antibranching group succeeded in preventing a wholesale abandonment of all branching restrictions; on the other hand, the probranch-ing group succeeded in obtaining legislation that would allow national banks to establish branches within the city limits if state banks could do so. See Chapman & Westerfield, supra, at 108. 3

The campaign against unlimited branch banking of national banks was far more than just a campaign to protect the local bank lobby. 4 There was real fear of the effect that a central *413 bank with unlimited branching power could have on the financial and political climate of the country. 5 Senator Reed, for example, exclaimed:

“There are advocates of the general branch bank system. There were advocates of a single national bank, and we had one once, with branches scattered almost everywhere. It grew so arrogant and so powerful that it dared look ‘Old Hickory’ Jackson in the eye and tell him it could put up and pull down Presidents, and it required a vast amount of assurance for any capitalist in the world to say that to old Andrew Jackson. Andrew Jackson struck down the branch bank system, and he lives in song and story, and in the hearts of the American people, because he destroyed an institution that was creating a complete monopoly of credits and of money.” 66 Cong. Rec. 4438 (1925).

The McFadden Act’s branching limitations were thus geared in part “to prevent monopoly and to prevent an extreme concentration of financial power.” See Hearings on Federal Branching Policy before the Subcommittee on Financial Institutions of the Senate Committee on Banking, Housing, and Urban Affairs, 94th Cong., 2d Sess., p. 408 (1977) (Professor Kenneth Scott explaining various justifications for the Act). It is quite apparent that in the final compromise legislation this view was well represented. 6 See also ante, at 401-402, and n. 16.

*414 The legislative spirit of maintaining restraints on national banks’ branching while allowing them just enough flexibility to compete with state banks was again in force six years later when Congress enacted the Banking Act of 1933 (Glass-Steagall Act), 48 Stat. 162 , which allowed national banks to maintain branches outside of their home cities if state banks could. See 12 U. S. C. § 36 (c)(1). As the Court explained in First National Bank v. Walker Bank & Trust Co., 385 U. S. 252 (1966), the actual impetus for the changes in the branching rules at that time was the Comptroller of the Currency’s advocacy of a total elimination of all branching restrictions. See id., at 259 (citing Hearings before a Subcommittee of the Senate Committee on Banking and Currency pursuant to S. Res. No. 71, 71st Cong., 3d Sess., 7-10 (1931)). The proposal engendered the same sort of debate that the McFadden Act had, with some seeking a total lifting of restrictions on branch banking, and others wanting no further relaxation of the restrictions. See, e. g., S. Rep. No. 584, 72d Cong., 1st Sess. (1932); 76 Cong. Rec. 9890-9899 (1932).

In setting out the reasons for their opposition, many Members of Congress described the issue in terms of stopping the undue concentration of financial power. For example, when the Senate Committee on Banking and Currency reported out a bill which would have allowed national banks to establish branches without regard to state law, the minority Report complained:

“Advocates of the branch-banking system ignore the fact that such a system has never been tried in a country of 120,000,000 population, 3,000 miles across. They ignore the tendency in this country to centralize control of everything, and especially of credit. I believe that the branch-banking system would put us at the mercy of the *415 financial centers.” S. Rep. No. 584, supra, at 3 (minority views).

The bill discussed in that Report was not enacted; instead, in the midst of a filibuster by the antibranching forces, another compromise was reached, which continued to contain a general limitation on branching. As one of the conferees explained, “the controversy over the respective merits of what are known as ‘unit banking’ and ‘branch banking systems,’ a controversy that has been alive and sharp for years,” was not settled. “It is not. . . here proposed to give the advocates of branch banking any advantage.” 77 Cong. Rec. 5896 (1933) (remarks of Rep. Luce). 7

Petitioners therefore misconstrue the statute when they assert that the sole purpose of the restriction on branching was to ensure that national banks not use their new branching power to gain a competitive advantage over state banks, whose branching power was limited by state law. Petitioners argue that the McFadden Act represented a rejection of any earlier or contemporaneous sentiment against branch banking in general, and that the restrictions were merely a throw-in to protect the state banks whose own States may have precluded them from branching. Were that really the case, I would agree that other competitors were merely incidental beneficiaries of the legislation, and that respondent, *416 which does not represent state banks, would fall outside of the protected zone of interest.

But this argument is not faithful to the actual history. Instead, it is clear that Congress maintained restrictions on branching for all the reasons that have been cited. The exception that was created in 1927 and broadened in 1933 was merely a concession to the reality that unless national banks could establish at least some branches they could not effectively compete with state banks that could legally branch. While protecting state banks from the effects of the new branching power was certainly one of Congress’ goals, it is equally certain that the legislation also sought to control national banks for the sake of the aforementioned broader competitive interests. 8

Given this understanding of the multiple purposes behind the branch banking restrictions, this case falls squarely within our decisions in Association of Data Processing Service Organizations, Inc. v. Camp, 397 U. S. 150 (1970); Arnold Tours, Inc. v. Camp, 400 U. S. 45 (1970); and Investment Company Institute v. Camp, 401 U. S. 617 (1971). Just as the Court found in Association of Data Processing Service Organizations and Arnold Tours, there is embodied in the antibranching rule of the McFadden Act a congressional purpose to protect competitors of national banks in order to ensure that national banks remain limited entities. Although much of Congress’ attention focused on national banks’ most obvious competititors — state banks — there is no reason to believe that Congress “desired to protect” state *417 banks “alone from competition.” Arnold Tours, supra, at 46 .

Because I would decide the standing issue on this ground alone, I decline to join the Court’s sweeping discussion of the “zone- of interest” test. There will be time enough to deal with the broad issues surrounding that test when a case requires us to do so.

See Brief for Federal Petitioner 19-21; Brief for Petitioner in No. 85-972, p. 37.

As amended, this statute appears at 12 U. S. C. §81 .

In their exhaustive survey of branch banking in America, Chapman and Westerfield explained that “[t]he branch bank provisions of the McFadden. . . Act represented the minimum of concession which the anti-branch bank forces were willing to make, and its general purpose was to stifle the development of branch banking and to freeze it in its status quo.” See J. Chapman & R. Westerfield, Branch Banking 108 (1980 reprint); see also C. Golembe & D. Holland, Federal Regulation of Banking 1986-87, p. 134 (1986) (“McFadden Act represented a minor victory for branching advocates,” and is “probably more correctly viewed as an anti-branching statute”); G. Cartinhour & R. Westerfield, Branch, Group and Chain Banking and Historical Survey of Branch Banking in the United States 285 (1980 reprint) (McFadden Act was “a sort of truce between the interests at issue on the branch bank question”).

Protection of state banks for their own sake was, of course, one of the legislative purposes as well. Additionally, it appears that some legislators opposed unlimited national bank branching because they thought that the States would be forced to respond by allowing their banks to branch, an action the legislators were reluctant to force on the States.

Given the history of federal involvement in banking it was only natural that this concern would be prevalent. One of the factors that led to President Jackson’s successful “war” against the Second Bank of the United States in 1836 was the fear of the power, financial and political, that a national bank could wield. See Veto Message of President Jackson, in Senate Journal, July 10, 22d Cong., 1st Sess., 433 (1831); G. Van Deusen, The Jacksonian Era 60-67 (1959); Golembe & Holland, supra, at 5.

Some other portions of the McFadden Act provide additional evidence of the antibranching component of the legislation. For example, the Act stopped “the further extension of state-wide branch banking in the Federal reserve system by State member banks.” H. R. Rep. No. 83, 69th Cong., *414 1st Sess., 7 (1926) (quoted in First National Bank v. Walker Bank & Trust Co. 385 U. S. 252, 257 (1966)).

Similarly, the evidence surrounding passage of the Bank Holding Company Act of 1956, 70 Stat. 133 , as amended, 12 U. S. C. § 1841 et seq., which eliminated a “loophole” in the McFadden Act by restricting interstate purchases of banks by bank holding companies, see Northeast Bancorp, Inc. v. Board of Governors, FRS, 472 U. S. 159, 169 (1985), evinces a legislative purpose that went beyond merely protecting local bank branches. See, e. g., H. R. Rep. No. 609, 84th Cong., 1st Sess., 2 (1955) (“Ultimately, monopolistic control of credit could entirely remold our fundamental political and social institutions”); 101 Cong. Rec. 8030 (1955) (remarks of Rep. Rains) (bill is necessary “to close up and nail down the loopholes in our banking laws — loopholes which threaten not just the local independent bank but the whole traditional banking system as we know it and want to keep it”).

In analyzing current policy toward branch banking, the Department of the Treasury similarly stressed the variety of the issues that are involved: “Several additional issues must be considered in the analysis of geographical restrictions and the prospects of liberalization: competition and concentration, credit availability and service to the local community, the survival of small banks, the safety and soundness of the banking system, and the dual banking system.” Department of Treasury, Geographic Restrictions on Commercial Banking in the United States: The Report of the President 12 (1981).