Since 1980, federal courts (and legal scholars) have lost sight of the purpose of the NBA, allowing the OCC to expand its unusual and understudied body of federal corporate law into an increasingly wide range of wide range of business activities. OF THE COMPTROLLER OF THE CURRENCY, EXPLORING SPECIAL PURPOSE NATIONAL BANKS' STATUTES FOR FINTECH COMPANIES (2016).
F EDERAL C ORPORATE LAW
And it argues that this governance rationale and the NBA's corporate law design impose definitive limits on the powers of national banks and on the OCC's chartering authority. It is part of the corporate charters of national banks and is therefore subject to the opposite, fixed rule of construction: ambiguity is strictly to the detriment of the company.18.
National Bank Exceptionalism
1752a, which succeeded the Bureau of Credit Union, was originally part of the Farm Credit Administration. Member banks also control the Federal Reserve Bank Boards, which appoint six of the nine directors.
The Corporate Law of National Banks
- Statutory corporate law
- A dm inistrative corporate law
- Judge-m ade corporate law
- W HY N ATIONAL B AN KS?
Scriggins, Protecting Directors and Officers from Liability: The Impact of the Model Business Corporation Act, 56 BUS. OF THE CURRENCY COMPTROLLER, SUMMARY OF THE OPINIONS OF THE CURRENCY COMPTROLLER WITH REGARD TO THE ACTIVITIES AND POWERS OF NATIONAL BANKS. noting that the FDIC and Resolution Trust Corporation have "sued hundreds of directors and officers of failed thrift stores and banks" in the wake of the savings and loan debacle); Julie Andersen Hill and Douglas K.
considering an action by a receiver of a national bank and holding that the NBA does not relieve directors of the common law duty to diligently and honestly manage the affairs of the bank); Atherton v. Moreover, from a political economy perspective, the presence of the OCC—a federal administrative agency that has no particular expertise in corporate law and that, in its supervisory capacity, maintains constant communications with national banks' boards of directors and management teams - as a leading promulgator of national bank corporate law raises questions. But many of the NBA's founders, including Salmon Chase, thought the case was wrongly decided.
SEC'Y OF THE TREASURY, REPORT OF THE SECRETARY OF THE TREASURY ON THE STATE OF THE FINANCES FOR THE YEAR ENDING JUNE 30, 1861, at 17 (Dec hereinafter REPORT ON THE FINANCES 1861] (arguing that such [fall) s] within the spirit, if not within the letter, of the constitutional prohibition"). For the sake of the currency, a system of national banks must be established;. The NBA created a new system of federally chartered banks to issue .a new money supply: bank notes printed at the Treasury Department, bearing the imprint of the United States, and distributed to national banks for circulation and redemption.
While previous literature has described these basic features of the NBA, it has neglected other critical provisions that forced national banks to operate as an integrated, horizontally networked system rather than as a mere collection of independent firms.
The National Bank Act as an Outsourcing Scheme
Few, if any, NBA supporters seem to have favored Treasury bills over greenbacks.170 President Lincoln certainly did not. "During an existing war it is the special duty of the national government to provide the people with a sound circulating medium," he wrote. Sherman said much the same.176 When asked, "Why should we even look at the interests of the banks;.
On the liability side issue, outsourcing was a premodern form of administrative independence, established before the advent of the commission system. Finally, one critical feature of the original NBA, overlooked by scholars, underscores the fact that Congress did not think of national banks primarily as private businesses: the Act required the banks to report their income to the federal government share. Congress also authorized members of the Federal Reserve Board to serve for terms of years, removable only by the president "for cause." See Federal Reserve Act § 10; see also Jane Manners & Lev Menand, The Three Permissions: Presidential Removal and the Statutory Limits of Agency Independence, 121 COLUM.
One of the advantages of the planned national banking system, Chase noted, is that it would not have this problem; it would give the people “a share in the profits of circulation.” 186 He noted that the system would give a 'franchise tax' to the government on their revenues.192 When outsourcing money issuance - in the past, the federal government tried to keep a portion of the revenues from money creation; it only surrendered enough revenue to attract private capital into the system.
The Rationale for Federal Chartering
THE COLLAPSE OF BANKING LAW
It is part of the federal charter for national banks that must be strictly construed against the corporation under established ultra vires doctrines. But in the 1980s, courts took a more deferential stance toward the OCC's efforts to expand the range of activities it considered part of the "business of banking." 21 of the Banking Act of 1933 - not a corporate powers provision - which removes the corporate character of the question.
According to a well-known rule, any public grant of property or of privileges or franchises, if ambiguous, must be construed against the grantee and in favor of the public."); id. Friedman argues in passing that in the second half of the 19th century courts " began to 'indicate' powers much more freely." Incidentally, like Hovenkamp and Friedman, Horwitz suggests that by the turn of the twentieth century.
Moreover, even if Chevron deference applied to the OCC's interpretations of national banks' corporate powers, the reasonableness of the OCC's interpretations must still be evaluated against the backdrop of the corporate law principle that ambiguities must be construed strictly against the corporation. Not surprisingly, the latest edition of the OCC's Activities Permissible for National Banks includes activities far removed from the enumerated banking powers that Congress specified.
Expanding Corporate Chartering
O utsourcing versus licensing
For most of its history, the OCC has been highly selective in granting charters to national banks. Licensing systems typically admit all applicants who meet required standards, but Congress expected the OCC not to do so; it had to be selective. Ten years later, when the OCC formalized its chartering standards through regulation, it adopted the six statutory factors as the basis for transmitting charter applications.
Subsequent case law confirmed the OCC's broad discretion to deny charter applications based on the six statutory factors, including the "necessity and convenience" factor. Jones, The Origin of the Certificate of Convenience and Public Necessity: Deuelopments in the COLUM States. The OCC understood this, too: In 1976, it asserted that "banks' vital relationship to the monetary system precludes the full operation of a free market with unrestricted entry."263 In evaluating applications for bank charter, it stated, "[ t] the current economic condition or growth potential of the market in which the new bank proposes to locate is an important consideration.”264.
In 1980, however, the OCC, apparently under pressure from Congress,265 announced a major "shift in emphasis."266 It would no longer reject bank charters because of "difficult market conditions [or] the existence of an 'adequate' number of bank branches."267 "Convenience and community needs according to banking.The essence of the Certificate of Public Convenience and Necessity is to exclude otherwise qualified applicants from the market.
Perm issible versus essential activities
The merits of the OCC's legal position, and its potential consequences for federal preemption of state consumer laws, have received extensive analysis. The passage by Congress of the Commerce Regulation Act of 1887 marked the beginning of an era in the exercise of the power of the federal government over interstate commerce. The constitution of the Interstate Commerce Commission in 1887 marks the beginning of federal regulation in this intimate way.
Collins v. The 200th anniversary of the Constitution coincided with a centennial, the 100th anniversary of the federal administrative state. Congress' passage in 1887 of the Interstate Commerce Act, which made railroads the first industry subject to federal regulation, and the act's creation of the nation's first federal regulatory agency, the Interstate Commerce Commission, changed the tripartite structure of the Framers profound. OCC has chartered “is not illegally incorporated solely because its activities should or have been limited by the Comptroller of the Coin to those of a trust company.”
In addition, member banks elect six of the nine directors of each of the twelve regional Federal Reserves. Securities issued or guaranteed by national banks are exempt from registration under the federal securities laws,301 and their securities offerings are exempt from the civil liability provisions of § 11 and § 12(a)(2) of the Securities Act. 302 Because registered offerings are one of the triggers for periodic reporting requirements under the Securities Exchange Act of 1934,303 and because the Exchange Act itself imposes lenient thresholds for registration and deregistration on banks,304.
The Rise of Federal General Incorporation?
And when the OCC abandoned the PCN chartering standard in 1980, the federal partnership under the NBA became “general” in the second sense. i.e., the selective criteria by which the OCC evaluated community needs were abandoned).312 It was therefore the third sense of. But the OCC's current attempt to abandon depository activities as essential to the "banking industry" – coupled with the successful expansion of the outer limits of national banks' permitted activities – now threatens to transform the NBA into something close to comes from a. Understated in the debates over the OCC's proposed fintech charter is the full range of business activities that, under the OCC's interpretation of its own powers, would qualify for federal charters.
Thus, if the OCC were empowered to exempt non-depository firms, it would have carte blanche to invite much of the finance, insurance and real estate (FIRE) sector—the single largest industry in the U.S. 312 Of course, the OCC has continued to review the suitability of bank organizers and their business plans prior to the issuance of national bank charters, in contrast to modern general corporate charters. Incidentally, any investment company that the OCC organized as a national nondepository bank would be exempt from the entire edifice of federal investment company regulation.)318.
Would these companies qualify for federal charters under the OCC's interpretation of its chartering authority?321 And what about commercial and industrial companies that lend to their customers? Can their commercial and industrial activities be considered 'incidental'? Should the OCC prevail in the courts, the national banks' peculiar corporate law could soon play an important role in the organization of America's banks.
