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June 25, 1992



The opinion of the court was delivered by: ROYCE C. LAMBERTH

This matter comes before the court upon the parties' cross-motions for summary judgment. Plaintiffs in this case are the Conference of State Bank Supervisors ("CSBS"), a professional association of state government officials responsible for chartering and regulating more than 10,000 state-chartered commercial banks and state-chartered savings institutions, and the Independent Bankers Association of America ("IBAA"), a non-profit membership association that represents over 6500 federal and state-chartered banks (referred to collectively as "plaintiffs"). Defendants in this matter are the Office of Thrift Supervision ("OTS") and Timothy Ryan, the director of OTS (referred to collectively as "OTS" or "defendants").

 On May 1, 1992, plaintiffs filed their complaint for declaratory and injunctive relief. Plaintiffs also filed a motion for preliminary injunction. On May 8, 1992, the court denied plaintiffs' motion for preliminary injunction. The parties subsequently filed the motions for summary judgment that are presently at issue.


 There is no genuine issue as to any of the material facts in this case. See generally Complaint; Plaintiffs' Statement of Material Facts Not in Dispute; Defendants' Statement of Material Facts as to Which There is no Genuine Issue. In their complaint, plaintiffs challenge a regulation which permits interstate branching by federal savings associations. Although prior to the adoption of this rule, OTS's general policy prohibited interstate branching by federal savings associations, interstate branching in various forms has been authorized for some time. *fn1"

 The . . . [OTS] proposes to amend its policy statement on branching on federal savings associations. The proposed amendment deletes current regulatory restrictions on the branching authority of federal savings associations to permit nationwide branching to the extent allowed by federal statute. The amendment is intended to facilitate consolidation and geographic diversification among savings associations, and thereby foster safety and soundness, and to improve the quality of services available to customers. The proposal also clarifies a provision regarding examination of a branching applicant's past record of compliance with the Community Reinvestment Act [CRA] and otherwise updates and streamlines the branching policy statement by deleting some provisions and consolidating the remaining paragraphs by subject matter.

 56 Fed. Peg. at 67236.

 The notice of the proposed rule also reviewed the statutory authority for the rule. OTS noted that Congress had given the FHLBB and OTS "exceptionally broad authority to regulate from 'cradle to grave' the branching operations and other activities of federal thrifts." Id. at 67237 (footnote omitted) (referring to the Home Owners' Loan Act, 12 U.S.C. § 1464(r) ("HOLA"), which has been applicable to federal associations since the enactment of the Garn-St Germain Act of 1982). The notice then states that "on numerous occasions the courts have confirmed that the OTS's authority in this respect is plenary and not bounded by any restrictions of state law." 56 Fed. Reg. 67237. Pursuant to this authority, therefore, federal savings associations may be allowed to branch on an interstate basis." Id. (footnote omitted).

 The proposal then provided the reasons that OTS was considering allowing nationwide branching by federal associations. OTS stated that:

 allowing federal savings associations to branch interstate to the full extent permitted by statute will enable thrifts to diversify geographically their operations and thereby enhance safety and soundness. Associations with interstate networks will be able to diversify their loan portfolios and lines of business, and thereby spread the risk of losses resulting from fluctuations in regional economies. Some associations that are currently subsidiaries of multiple savings and loan holding companies also may be able to reduce costs and enjoy economies of scale by consolidating operations into one association.


 OTS recognized that permitting interstate branching will not, in and of itself, prevent future costly failures of thrift institutions. Id. OTS stated, however, that when coupled with the new safeguards that are provided in FIRREA, interstate branching "can be an important cornerstone in a new foundation of institutional safety and soundness." Id. OTS concluded that:

 nationwide branching authority for federal savings associations will enhance the safety and soundness of the industry, reduce operating costs, increase healthy competition among depository institutions, and improve the quality of services furnished to customers. These benefits will help decrease the risk to the SAIF deposit insurance fund and, ultimately, to the taxpayer.


 OTS received 81 comments in response to this proposal, including comments from CSBS and IBAA. 57 Fed. Reg. at 12204. Sixty-nine of these comments opposed the proposal for various reasons. Id. Some commenters criticized the merits of the proposed rule, arguing that the rule would encourage unsound practices and that interstate institutions would not be responsive to the needs of local ...

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