problem because, among other reasons, I believe that Howard has already shown to you a copy of the opinion of our firm on the matter. Please drop me a line and tell me about yourself, both for my benefit and that of the other Phi Delta Phi's in Detroit and Michigan. Of course, if you want to talk about the bank problem further, I would be only too glad to discuss it with you. Sincerely yours, E. B. MERRY. STATE BANKING DEPARTMENT, Bulletin No. 9, 1938 Revision To All Michigan State Banks: This bulletin is to amend and supersede Bulletin No. 9 issued August 4, 1937. BRANCHES Statewide branch banking permitted under Act 66 of the Public Acts of 1929 has been limited by the Michigan Financial Institutions Act now in effect. General rule Section 34 of the latter act sets forth the following restrictions upon the establishment of branches by Michigan State banks in the State of Michigan : 1. Branches within the same city or village.-Any bank may establish and operate a branch or branches within the limits of the city or village in which said bank is located, with the approval of the commissioner, based upon the necessity for establishment of the branch and the prospects of successful operation, if established. 2. Branches outside city or village.-Any bank may establish and maintain branches in any village or city other than that in which it was originally chartered, subject to the following restrictions: (a) Approval of the Commission, based on the sufficiency of capital and surplus of the bank, the necessity for the establishment of the branch, and the prospects of successful operation, if established. (b) The parent bank must have a capital of at least $50,000, as well as capital and surplus in an amount at least equal to the aggregate minimum capital and surplus, respectively, required for the establishment of a bank in each of the places where the bank and its branches are to be located. (c) If the parent bank has its principal office in a city of 75,000 or over according to the last Federal census, the branch must be within the same county as the parent bank, or within 25 miles from the principal office of the parent bank. (d) No branch may be established in a city or village in which a bank is in operation, if the establishment of such branch would result in more than one bank or branch bank to each 3,000 population in such city or township where such branch is proposed to be located. 3. Exception: Consolidation or purchase and sale.-Notwithstanding restrictions of 2 (c) and 2(d) above stated, and without complying with the conditions contained therein, branches may be established in cities or villages other than that in which the parent bank is located in connection with the consolidation of two or more State banks, or any one or more banks or trust companies, and in connection with purchase of assets of a State bank. This exception is contained in section 114 of the Michigan Financial Institutions Act. The other requirements, namely 2(a) and 2(b) set forth above, must, however, be met. ALVAN MACAULEY, Jr., Commissioner of the Banking Department. Mr. MATTHEW HALE, HOOKER, ALLEY & DUNCAN, COUNSELORS AT LAW, New York, August 10, 1964. Chief Counsel, Banking and Currency Committee of the Senate, Senate Office Building, Washington, D.C. DEAR MR. HALE: In accordance with the understanding reached with you at the close of the hearing on S. 2883 Friday, August 7, I am enclosing herewith a copy of the statement which I prepared and submitted to the committe at the time of the hearing, together with copies of the various legal opinions to which reference was made in my oral testimony. It was my understanding, at the time I testified, that copies of all of the legal opinions to which I referred had been submitted by the Comptroller's office to the committee but you informed me that your files contained only some of these opinions. The following documents are, therefore, enclosed to make sure that the committee's files are complete. (a) Written statement of James B. Alley of the firm of Hooker, Alley & Duncan, counsel for Michigan National Bank filed with the committee at the time of the hearing. (See p. 19.) (b) Copy of letter from Mr. Byron L. Ballard to the Comptroller of the Currency dated May 29, 1940, together with the enclosures therein referred to: (1) Letter from Howard J. Stoddard, president of Lansing National Bank to Hon. Thomas Read, attorney general of the State of Michigan, dated May 27, 1940. (2) Opinion of Hon. Thomas Read, attorney general of the State of Michigan, addressed to Mr. H. J. Stoddard, president of Lansing National Bank, dated May 28, 1940. (3) Copy of Bulletin No. 9 issued by Alvan Macauley, Jr., commissioner of the Banking Department of the State of Michigan, Lansing, Mich., dated July 15, 1938. (See p. 53.) (4) Copy of opinion of the law firm of Butzel, Eaman, Long, Gust & Bills, National Bank Building, Detroit, Mich., to Mr. Howard J. Stoddard, president of Lansing National Bank, dated May 11, 1940. (5) Copy of opinion of the law firm of Bulkley, Ledyard, Dickinson & Wright, Union Guardian Building, Detroit, Mich., to Mr. Howard J. Stoddard, president of National Bank of Lansing, dated May 9, 1940. (6) Copy of opinion of the law firm of Shields, Ballard, Jennings & Taber, 1400 Olds Tower Building, Lansing, Mich., to Mr. Howard J. Stoddard, president of Lansing National Bank, dated May 9, 1940. (c) Letter from Mr. E. B. Merry, an associate attorney of the law firm of Bulkley, Ledyard, Dickinson & Wright, dated July 19, 1940, addressed to Mr. Norman C. Tietjen, Office of the General Counsel, Treasury Department, Washington, D.C., together with a copy of Bulletin No. 9 referred to therein issued by the Michigan State Banking Department under date of July 15, 1938. (See pp. 51 and 53.) Mr. Merry had formerly been assistant attorney general of the State of Michigan and counsel of the State banking commission at the time the legislation dealt with in his letter and at issue in S. 2883 was drafted. It will be noted that, in that letter, Mr. Merry made an analysis of the then existing statutes and the historical background, and particularly with respect to Bulletin No. 9 which was originally issued during the year in which Mr. Merry was assistant attorney general of Michigan and assigned as counsel to the Michigan State Banking Commission. It will be noted that Mr. Merry gives his opinion that, under the statutes existing in 1940, legislative approval had been given to the fact that a consolidating or purchasing State bank "could establish and operate as a branch or branches the principal offices and the branch offices of the selling bank or banks." Attention is also specifically invited to the fact that Bulletin No. 9 advises that the geographical limitations and provisions with respect to the population requirements shall apply to new branches by existing banks, but do not constitute a limitation on the establishment of branches by a consolidated or purchasing bank. (d) Opinion letter of Byron Ballard of the firm of Shields, Ballard, Jennings & Taber, Lansing, Mich., dated July 10, 1940, and addressed to Howard J. Stoddard, president of Lansing National Bank. (e) Opinion letter of the Honorable Robert H. Jackson, Attorney General of the United States, dated July 30, 1940, addressed to the Secretary of the Treasury regarding the establishment of branches by consolidating national banks doing business in the State of Michigan. This opinion is published in volume 39 of Opinions of the Attorney General of the United States at page 469. The headnote of that opinion reads as follows: "Establishment of branches by national banks under section 114, Michigan Financial Institutions Act, adopted and made applicable by section 5155 R.S., as amended, a national bank doing business in Michigan may establish and operate as branches, anywhere in the State, existing State or National banks legally acquired by purchase or consolidation, provided that statutory requirements of capital are met. 36 Op. 344 distinguished." All of the above legal opinions and Bulletin No. 9 of the Michigan State Banking Commission were on file in the Office of the Comptroller and the General Counsel for the Secretary of the Treasury at the time the Comptroller made his decision denying the application of the Michigan National Bank to establish the branches in question. It is submitted that the Comptroller was clearly in error in requiring, as a matter of law, the permanent closing of the three branches in Grand Rapids and the one in Saginaw. He completely overlooked the provisions of section 36(c) of the National Bank Act. The competitors of Michigan National Bank have enjoyed the unwarranted special privileges resulting from the error of law committed in 1940. Only by the passage of a special bill by the Congress can Michigan National Bank be afforded an opportunity to attempt to operate on the equal competitive basis envisaged by the McFadden Act. Respectfully submitted. Enclosures. JAMES B. ALLEY. SHIELDS, BALLARD, JENNINGS & TABER, COMPTROLLER OF THE CURRENCY, DEAR SIR: We hand you herewith true copies of the following letters: (1) Letter of Lansing National Bank to Hon. Thomas Read, attorney general of Michigan. (2) Opinion of Thomas Read, attorney general, addressed to Mr. H. J. Stoddard, president, Lansing National Bank, under date May 28, 1940. (3) Copy of Bulletin No. 9 under date July 15, 1938, issued by the Michigan State Banking Department. [See p. 53.] (4) Opinion of Butzel, Eaman, Long, Gust & Bills, dated May 11, 1940. (5) Opinion of Bulkley, Ledyard, Dickinson & Wright, under date May 9, 1940. (6) Opinion of Shields, Ballard, Jennings & Taber, under date May 9, 1940. We have the originals of all of these opinions which relate to the right of a national bank to operate as branches in the State of Michigan banks acquired by consolidation or purchase. Very truly yours, BYRON L. BALLARD. MICHIGAN NATIONAL BANK, Hon. THOMAS READ, Attorney General, State of Michigan, Lansing, Mich. DEAR MR. READ: We have had under discussion the question as to whether or not a national bank could operate as a branch office anywhere in the State of Michigan an existing national bank which it might acquire by purchase or consolidation. We have been advised that the national banking laws would permit such operation providing the State laws would allow the same privilege to Statechartered banks. We would therefore appreciate receiving your opinion on the following question: May either a national banking institution or a State bank, now doing business in the State of Michigan, establish and operate as branches anywhere in the State existing State or national banks legally acquired by purchase or consolidation, provided capital funds are adequate to meet statutory requirements? Very truly yours, H. J. STODDARD, President. Mr. H. J. Stoddard, President, Lansing National Bank, STATE OF MICHIGAN, OFFICE OF THE ATTORNEY GENERAL, DEAR SIR: Under recent date and in behalf of your bank and other national banking institutions doing business in the State of Michigan and interested in a proposed future purchase or consolidation, you have submitted to this office for consideration and opinion the following question: May a national banking institution doing business in the State of Michigan establish and operate as branches within the State and in various cities of location, existing State or national banks legally acquired by purchase or consolidation?" In approaching this question primary consideration should be given to the following factual principles: 1. State banks are corporate agencies of a quasi-public nature, chartered by State authority only, and subject to State law and State supervisory regulation. 2. Federal banking institutions are also corporate agencies of a quasi-public nature, chartered by Federal authority only and subject to Federal law and Federal supervisory regulation in the fundamental exercise of their franchise. No encroachment of authority, either legislatively or regulatively, should be permitted in determining the legal status of either class of institution. Each class is constitutionally estopped from interference with the other, and no authority appears to have been delegated or surrendered by or from either authority to the other. Save the requirement of general law obedience by all classes of people and institutions, State authority has no supervisory or regulatory jurisdiction over the business of a Federal banking institution; neither has Federal authority any similar jurisdiction over State banking institutions. While surrendering no authority to State supervision, yet restricting to an extent in conformity to restrictions placed upon State banks by State law, the National Banking Act, title 12, United States Code Annotated, section 36, appears to completely cover the field of Federal legislation relative to the establishment and operation of national bank branches. To this extent said section 36, in paragraph (c) thereof, which is the only portion of the section pertinent to the question presently under consideration, provides by way of prerequisites: 1. That such authority must have been previously and expressly granted to State banks by the law of the State in question and "subject to the restrictions as to location imposed by the law of the State on State banks." 2. That branches outside of the municipality of parent location shall have a certain paid in and unimpaired capital stock, depending upon specific State and municipal population. A subsequent paragraph (par. (d)) requires a relative minimum aggregate capital for each banking association and its branches. The text of said paragraph (c) of section 36 authorizing the establishment and operation by national banking associations of new branches (meaning branches subsequent in date to February 25, 1927, as in a previous paragraph expressed) is as follows: "A national banking association may, with the approval of the Comptroller of the Currency, establish and operate new branches: (1) Within the limits of the city, town, or village in which said association is situated, if such establishment and operation are at the time expressly authorized to State banks by the law of the State in question; and (2) at any point within the State in which said association is situated, if such establishment and operation are at the time authorized to State banks by the statute law of the State in question by language specifically granting such authority affirmatively and not merely by implication or recognition, and subject to the restrictions as to location imposed by the law of the State on State banks." Said paragraph (c) contains certain restrictive provisions not essential to the present consideration. The authority granted by Federal law for the establishment and operation of branch banks, being dependent upon statute law of the State of location granting such authority affirmatively and not by mere implication or recognition, to State banks, our consideration is naturally carried to the provisions of State law authorizing the establishment and operation of State bank branches Iwithin the State. Two separate and individual sections of the Michigan Financial Institutions Act (Act 341, P.A. 1937) invite our consideration regarding authority to State banks to establish and operate branches. Section 34 of the State act authorizes any bank having a certain specified minimum capital to establish and maintain branches "within any village or city, other than that in which it was originally chartered upon obtaining permission in writing from the commission” [banking commission]. Then follows in said section apt language limiting the power of the commission to grant such permission in the absence of certain minimum capital and surplus, "and unless the commission is satisfied as to the sufficiency of the capital and surplus of the bank, the necessity for the establishment of such branch and the prospects of successful operation if established." Under the caption of "Corporate Changes," and after providing for "Conversion of State Banks and Trust Companies" (sec. 104), "Sale of Assets of Banks" (sec. 112), and for "Conversion of State Bank Into a National Banking Association" (sec. 113), further provision is made for branch banking in section 114 of the act as follows: "Notwithstanding the provisions of any law to the contrary, any consolidated bank resulting from the consolidation of two or more State banks or any one or more banks or trust companies, as provided for in section 104 of this act, and any State bank or national banking association which purchases the assets of a State bank, as provided for in section 112 of this act, may, with the written permission of the commission, establish and operate as a branch or branches the consolidating bank or banks or any bank which sells its assets to another State bank or national banking association, as provided in section 112 of this act : Provided, however, That the commission shall not grant such permission unless the unimpaired capital of the consolidated or purchasing bank or association is at least $50,000, and the capital and surplus of such bank or association is in an amount at least equal to the aggregate minimum capital and surplus, respectively, required for the establishment of a bank in each of the various places where such bank or association and its branch or branches are to be located, and the commission is satisfied as to the sufficiency of the capital and surplus of such bank or association, and the necessity for the establishment of such a branch or branches, and the prospects of successful operation if established." The requirement of State approval referred to in the above-quoted portion of section 114 must be construed as applicable only to the establishment and operation, as branches, of those institutions therein enumerated and which retain after purchase or consolidation their State charter and State character and not to national banking institutions retaining their Federal charter and Federal character within the purchase or consolidation. There appears to be no ambiguity in the terms of the Michigan Financial Institutions Act under consideration and no encroachment upon Federal authority, and while the Federal Banking Act reserves the regulation and supervision of the institutions unto Federal authority, it approaches a cooperative relationship to State authority without surrender of prerogative. The question under consideration being with reference to Federal institutions only, no question of infringement of State sovereignty is here involved. In the light of the above reasoning and based upon the statutes herein referred to, it is my opinion that a national banking institution, duly and legally chartered by Federal authority, may establish and operate as branches within the various cities of location within the State of Michigan, existing State or National banks legally acquired by purchase or consolidation and subject to the approval of the Federal Comptroller of the Currency. Very respectfully, THOMAS READ, Attorney General. BUTZEL, EAMAN, LONG, GUST & BILLS, Mr. HOWARD J. STODDARD, President, Lansing National Bank, Lansing, Mich. DEAR MR. STODDARD: You have asked to be advised as to our opinion on the power of a national bank to establish as branches in different cities of Michigan existing State or National banks acquired by purchase or consolidation. |