WATTERS, COMMISSIONER, MICHIGAN OFFICE OF FINANCIAL AND INSURANCE SERVICES v. WACHOVIA BANK, N. A., et al.

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CASES ADJUDGED
IN THE
SUPREME COURT OF THE UNITED STATES
AT
OCTOBER TERM, 2006
WATTERS, COMMISSIONER, MICHIGAN OFFICE
OF FINANCIAL AND INSURANCE SERVICES
v. WACHOVIA BANK, N. A., et al.
certiorari to the united states court of appeals for
the sixth circuit
No. 05–1342. Argued November 29, 2006—Decided April 17, 2007
National banks’ business activities are controlled by the National Bank
Act (NBA), 12 U. S. C. § 1 et seq., and regulations promulgated thereun
der by the Office of the Comptroller of the Currency (OCC), see §§ 24,
93a, 371(a). OCC is charged with supervision of the NBA and, thus,
oversees the banks’ operations and interactions with customers. See
NationsBank of N. C., N. A. v. Variable Annuity Life Ins. Co., 513 U. S.
251, 254, 256. The NBA grants OCC, as part of its supervisory author
ity, visitorial powers to audit the banks’ books and records, largely to
the exclusion of other state or federal entities. See § 484(a); 12 CFR
§ 7.4000. The NBA specifically authorizes federally chartered banks to
engage in real estate lending, 12 U. S. C. § 371, and “[t]o exercise . . .
such incidental powers as shall be necessary to carry on the business of
banking,” § 24 Seventh. Among incidental powers, national banks may
conduct certain activities through “operating subsidiaries,” discrete
entities authorized to engage solely in activities the bank itself could
undertake, and subject to the same terms and conditions as the bank.
See § 24a(g)(3)(A); 12 CFR § 5.34(e).
Respondent Wachovia Bank is an OCC-chartered national banking as
sociation that conducts its real estate lending business through respond
1

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2 WATTERS v. WACHOVIA BANK, N. A.
Syllabus
ent Wachovia Mortgage Corporation, a wholly owned, North Carolina
chartered entity licensed as an operating subsidiary by OCC, and doing
business in Michigan and elsewhere. Michigan law exempts banks,
both national and state, from state mortgage lending regulation, but
requires their subsidiaries to register with the State’s Office of Financial
and Insurance Services (OFIS) and submit to state supervision. Al
though Wachovia Mortgage initially complied with Michigan’s require
ments, it surrendered its Michigan registration once it became a wholly
owned operating subsidiary of Wachovia Bank. Subsequently, peti
tioner Watters, the OFIS commissioner, advised Wachovia Mortgage it
would no longer be authorized to engage in mortgage lending in Michi
gan. Respondents sued for declaratory and injunctive relief, contend
ing that the NBA and OCC’s regulations preempt application of the
relevant Michigan mortgage lending laws to a national bank’s operating
subsidiary. Watters responded that, because Wachovia Mortgage was
not itself a national bank, the challenged Michigan laws were applicable
and were not preempted. She also argued that the Tenth Amendment
to the U. S. Constitution prohibits OCC’s exclusive regulation and super
vision of national banks’ lending activities conducted through operating
subsidiaries. Rejecting those arguments, the Federal District Court
granted the Wachovia plaintiffs summary judgment in relevant part,
and the Sixth Circuit affirmed.
Held:
1. Wachovia’s mortgage business, whether conducted by the bank it
self or through the bank’s operating subsidiary, is subject to OCC’s su
perintendence, and not to the licensing, reporting, and visitorial regimes
of the several States in which the subsidiary operates. Pp. 10–21.
(a) The NBA vests in nationally chartered banks enumerated pow
ers and all “necessary” incidental powers. 12 U. S. C. § 24 Seventh. To
prevent inconsistent or intrusive state regulation, the NBA provides
that “[n]o national bank shall be subject to any visitorial powers except
as authorized by Federal law . . . .” § 484(a). Federally chartered
banks are subject to state laws of general application in their daily busi
ness to the extent such laws do not conflict with the letter or purposes
of the NBA. But when state prescriptions significantly impair the ex
ercise of authority, enumerated or incidental under the NBA, the State’s
regulations must give way. E. g., Barnett Bank of Marion Cty., N. A.
v. Nelson, 517 U. S. 25, 32–34. The NBA expressly authorizes national
banks to engage in mortgage lending, subject to OCC regulation,
§ 371(a). State law may not significantly burden a bank’s exercise of
that power, see, e. g., id., at 33–34. In particular, real estate lending,
when conducted by a national bank, is immune from state visitorial con

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3 Cite as: 550 U. S. 1 (2007)
Syllabus
trol: The NBA specifically vests exclusive authority to examine and in
spect in OCC. 12 U. S. C. § 484(a). The Michigan provisions at issue
exempt national banks themselves from coverage. This is not simply a
matter of the Michigan Legislature’s grace. For, as the parties recog
nize, the NBA would spare a national bank from state controls of the
kind here involved. Pp. 10–15.
(b) Since 1966, OCC has recognized national banks’ “incidental”
authority under § 24 Seventh to do business through operating sub
sidiaries. See 12 CFR § 5.34(e)(1). That authority is uncontested by
Michigan’s Commissioner. OCC licenses and oversees national bank
operating subsidiaries just as it does national banks. See, e. g.,
§ 5.34(e)(3); 12 U. S. C. § 24a(g)(3)(A). Just as duplicative state examina
tion, supervision, and regulation would significantly burden national
banks’ mortgage lending, so too those state controls would interfere
with that same activity when engaged in by a national bank’s operating
subsidiary. This Court has never held that the NBA’s preemptive reach
extends only to a national bank itself; instead, the Court has focused on
the exercise of a national bank’s powers, not on its corporate structure,
in analyzing whether state law hampers the federally permitted activi
ties of a national bank. See, e. g., Barnett Bank, 517 U. S., at 32. And
the Court has treated operating subsidiaries as equivalent to national
banks with respect to powers exercised under federal law (except where
federal law provides otherwise). See, e. g., NationsBank, 513 U. S., at
256–261. Security against significant interference by state regulators
is a characteristic condition of “the business of banking” conducted by
national banks, and mortgage lending is one aspect of that business.
See, e. g., 12 U. S. C. § 484(a). That security should adhere whether the
business is conducted by the bank itself or by an OCC-licensed operating
subsidiary whose authority to carry on the business coincides completely
with the bank’s.
Watters contends that if Congress meant to deny States visitorial
powers over operating subsidiaries, it would have written § 484(a)’s ban
on state inspection to apply not only to national banks but also to their
affiliates. She points out that § 481, which authorizes OCC to examine
“affiliates” of national banks, does not speak to state visitorial powers.
This argument fails for two reasons. First, any intention regarding
operating subsidiaries cannot be ascribed to the 1864 Congress that
enacted §§ 481 and 484, or the 1933 Congress that added the affiliate
examination provisions to § 481 and the “affiliate” definition to § 221a,
because operating subsidiaries were not authorized until 1966. Second,
Watters ignores the distinctions Congress recognized among “affiliates.”
Unlike affiliates that may engage in functions not authorized by the
NBA, an operating subsidiary is tightly tied to its parent by the

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4 WATTERS v. WACHOVIA BANK, N. A.
Syllabus
specification that it may engage only in “the business of banking,”
§ 24a(g)(3)(A). Notably, when Congress amended the NBA to provide
that operating subsidiaries may “engag[e] solely in activities that na
tional banks are permitted to engage in directly,” ibid., it did so in an
Act providing that other affiliates, authorized to engage in nonbanking
financial activities, e. g., securities and insurance, are subject to state
regulation in connection with those activities, see, e. g., §§ 1843(k),
1844(c)(4). Pp. 15–20.
(c) Recognizing the necessary consequence of national banks’ au
thority to engage in mortgage lending through an operating subsidiary
“subject to the same terms and conditions that govern the conduct of
such activities by national banks,” § 24a(g)(3)(A), OCC promulgated 12
CFR § 7.4006: “Unless otherwise provided by Federal law or OCC regu
lation, State laws apply to national bank operating subsidiaries to the
same extent that those laws apply to the parent national bank.” Wat
ters disputes OCC’s authority to promulgate this regulation and con
tends that, because preemption is a legal question for determination by
courts, § 7.4006 should attract no deference. This argument is beside
the point, for § 7.4006 merely clarifies and confirms what the NBA al
ready conveys: A national bank may engage in real estate lending
through an operating subsidiary, subject to the same terms and condi
tions that govern the bank itself; that power cannot be significantly
impaired or impeded by state law. Though state law governs
incorporation-related issues, state regulators cannot interfere with the
“business of banking” by subjecting national banks or their OCC
licensed operating subsidiaries to multiple audits and surveillance under
rival oversight regimes. Pp. 20–21.
2. Watters’ alternative argument, that 12 CFR § 7.4006 violates the
Tenth Amendment, is unavailing. The Amendment expressly disclaims
any reservation to the States of a power delegated to Congress in the
Constitution, New York v. United States, 505 U. S. 144, 156. Because
regulation of national bank operations is Congress’ prerogative under
the Commerce and Necessary and Proper Clauses, see Citizens Bank
v. Alafabco, Inc., 539 U. S. 52, 58, the Amendment is not implicated
here. P. 22.
431 F. 3d 556, affirmed.
Ginsburg, J., delivered the opinion of the Court, in which Kennedy,
Souter, Breyer, and Alito, JJ., joined. Stevens, J., filed a dissenting
opinion, in which Roberts, C. J., and Scalia, J., joined, post, p. 22.
Thomas, J., took no part in the consideration or decision of the case.

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5 Cite as: 550 U. S. 1 (2007)
Counsel
E. John Blanchard, Assistant Attorney General of Michi
gan, argued the cause for petitioner. With him on the briefs
were Michael A. Cox, former Attorney General, and Thomas
L. Casey, Solicitor General.
Robert A. Long argued the cause for respondents. With
him on the brief were Stuart C. Stock, Keith A. Noreika,
Emily Johnson Henn, Lori McAllister, and William J.
Perrone.
Sri Srinivasan argued the cause for the United States as
amicus curiae urging affirmance. With him on the brief
were Solicitor General Clement, Assistant Attorney Gen
eral Keisler, Deputy Solicitor General Hungar, Julie L.
Williams, Daniel P. Stipano, Horace G. Sneed, and Douglas
B. Jordan.*
*Briefs of amici curiae urging reversal were filed for the State of New
York et al. by Eliot Spitzer, former Attorney General of New York, Cait
lin J. Halligan, Solicitor General, Michelle Aronowitz, Deputy Solicitor
General, and Kathryn Sheingold, Assistant Solicitor General, by Anne
Milgram, former Acting Attorney General of New Jersey, and by the At
torneys General and former Attorneys General for their respective juris
dictions as follows: Troy King of Alabama, David W. Ma´ rquez of Alaska,
Terry Goddard of Arizona, Mike Beebe of Arkansas, Bill Lockyer of Cali
fornia, John Suthers of Colorado, Richard Blumenthal of Connecticut,
Carl C. Danberg of Delaware, Robert J. Spagnoletti of the District of Co
lumbia, Charles J. Crist, Jr., of Florida, Thurbert E. Baker of Georgia,
Mark J. Bennett of Hawaii, Lawrence G. Wasden of Idaho, Lisa Madigan
of Illinois, Steve Carter of Indiana, Thomas Miller of Iowa, Phill Kline of
Kansas, Greg Stumbo of Kentucky, Charles C. Foti, Jr., of Louisiana, G.
Steven Rowe of Maine, J. Joseph Curran, Jr., of Maryland, Tom Reilly of
Massachusetts, Mike Hatch of Minnesota, Jim Hood of Mississippi, Jere
miah W. (Jay) Nixon of Missouri, Mike McGrath of Montana, Jon Bru
ning of Nebraska, George J. Chanos of Nevada, Kelly A. Ayotte of New
Hampshire, Patricia A. Madrid of New Mexico, Roy Cooper of North
Carolina, Wayne Stenehjem of North Dakota, Jim Petro of Ohio, W. A.
Drew Edmondson of Oklahoma, Hardy Myers of Oregon, Thomas W. Cor
bett, Jr., of Pennsylvania, Roberto J. Sa´ nchez-Ramos of Puerto Rico, Pat
rick Lynch of Rhode Island, Henry McMaster of South Carolina, Larry
Long of South Dakota, Paul G. Summers of Tennessee, Greg Abbott of

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6 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
Justice Ginsburg delivered the opinion of the Court.
Business activities of national banks are controlled by the
National Bank Act (NBA or Act), 12 U. S. C. § 1 et seq., and
regulations promulgated thereunder by the Office of the
Comptroller of the Currency (OCC). See §§ 24, 93a, 371(a).
As the agency charged by Congress with supervision of the
NBA, OCC oversees the operations of national banks and
their interactions with customers. See NationsBank of
N. C., N. A. v. Variable Annuity Life Ins. Co., 513 U. S. 251,
254, 256 (1995). The agency exercises visitorial powers, in
cluding the authority to audit the bank’s books and records,
Texas, Mark L. Shurtleff of Utah, William H. Sorrell of Vermont, Robert
F. McDonnell of Virginia, Rob McKenna of Washington, Darrell V. Mc-
Graw, Jr., of West Virginia, Peggy A. Lautenschlager of Wisconsin, and
Patrick J. Crank of Wyoming; for Charles W. Turnbaugh, Commissioner
of Financial Regulation for the State of Maryland et al. by Mr. Curran,
former Attorney General of Maryland, Steven M. Sullivan, Solicitor Gen
eral, Jonathan R. Krasnoff, Thomas L. Gounaris, and Christopher J.
Young, Assistant Attorneys General, and Keith R. Fisher, Special Assist
ant Attorney General; for AARP et al. by Amanda Quester; for the Center
for State Enforcement of Antitrust and Consumer Protection Laws, Inc.,
by Thomas W. Merrill and Stephen D. Houck; for the National Association
of Realtors by David C. Frederick, Scott H. Angstreich, and Ralph W.
Holmen; and for the National Conference of State Legislatures et al. by
Richard Ruda and Arthur E. Wilmarth, Jr.
Briefs of amici curiae urging affirmance were filed for the American
Bankers Association et al. by Theodore B. Olson, Mark A. Perry, John D.
Hawke, Jr., Howard N. Cayne, Laurence J. Hutt, and Nancy L. Perkins;
for the Chamber of Commerce of the United States of America by Alan
Untereiner, Robin S. Conrad, and Amar D. Sarwal; for the Clearing
House Association L.L.C. by Michael M. Wiseman, Robert J. Giuffra, Jr.,
Suhana S. Han, Seth P. Waxman, Christopher R. Lipsett, Paul R. Q.
Wolfson, and David A. Luigs; for National City Bank by Glen D. Nager
and Beth Heifetz; for the New England Legal Foundation by Michael E.
Malamut and Martin J. Newhouse; for Richard J. Pierce, Jr., et al. by
Walter Dellinger, Jonathan D. Hacker, Christopher H. Schroeder, and Ni
cole A. Saharsky; and for Marcus Cole et al. by Sam Kazman and Hans
Bader.

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7 Cite as: 550 U. S. 1 (2007)
Opinion of the Court
largely to the exclusion of other governmental entities, state
or federal. See § 484(a); 12 CFR § 7.4000 (2006).
The NBA specifically authorizes federally chartered banks
to engage in real estate lending. 12 U. S. C. § 371. It also
provides that banks shall have power “[t]o exercise . . . all
such incidental powers as shall be necessary to carry on the
business of banking.” § 24 Seventh. Among incidental
powers, national banks may conduct certain activities
through “operating subsidiaries,” discrete entities author
ized to engage solely in activities the bank itself could under
take, and subject to the same terms and conditions as those
applicable to the bank. See § 24a(g)(3)(A); 12 CFR § 5.34(e)
(2006).
Respondent Wachovia Bank, a national bank, conducts its
real estate lending business through Wachovia Mortgage
Corporation, a wholly owned, state-chartered entity, licensed
as an operating subsidiary by OCC. It is uncontested in this
suit that Wachovia’s real estate business, if conducted by the
national bank itself, would be subject to OCC’s superintend
ence, to the exclusion of state registration requirements and
visitorial authority. The question in dispute is whether the
bank’s mortgage lending activities remain outside the gover
nance of state licensing and auditing agencies when those
activities are conducted, not by a division or department of
the bank, but by the bank’s operating subsidiary. In accord
with the Courts of Appeals that have addressed the issue,1
we hold that Wachovia’s mortgage business, whether con
ducted by the bank itself or through the bank’s operating
subsidiary, is subject to OCC’s superintendence, and not to
the licensing, reporting, and visitorial regimes of the several
States in which the subsidiary operates.
1 National City Bank of Indiana v. Turnbaugh, 463 F. 3d 325 (CA4
2006); Wachovia Bank, N. A. v. Burke, 414 F. 3d 305 (CA2 2005); 431 F. 3d
556 (CA6 2005) (case below); Wells Fargo Bank N. A. v. Boutris, 419 F. 3d
949 (CA9 2005).

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8 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
I
Wachovia Bank is a national banking association chartered
by OCC. Respondent Wachovia Mortgage is a North Caro
lina corporation that engages in the business of real estate
lending in the State of Michigan and elsewhere. Michigan’s
statutory regime exempts banks, both national and state,
from state mortgage lending regulation, but requires mort
gage brokers, lenders, and servicers that are subsidiaries of
national banks to register with the State’s Office of Financial
and Insurance Services (OFIS) and submit to state supervi
sion. Mich. Comp. Laws Ann. §§ 445.1656(1), 445.1679(1)(a)
(West 2002), 493.52(1), and 493.53a(d) (West 1998).2 From
1997 until 2003, Wachovia Mortgage was registered with
OFIS to engage in mortgage lending. As a registrant, Wa
chovia Mortgage was required, inter alia, to pay an annual
operating fee, file an annual report, and open its books and
records to inspection by OFIS examiners. §§ 445.1657,
445.1658, 445.1671 (West 2002), 493.54, 493.56a(2), (13) (West
1998).
Petitioner Linda Watters, the commissioner of OFIS, ad
ministers the State’s lending laws. She exercises “general
supervision and control” over registered lenders, and has au
thority to conduct examinations and investigations and to
enforce requirements against registrants. See §§ 445.1661,
445.1665, 445.1666 (West 2002), 493.58, 493.56b, 493.59,
493.62a (West 1998 and Supp. 2005). She also has authority
to investigate consumer complaints and take enforcement ac
tion if she finds that a complaint is not “being adequately
pursued by the appropriate federal regulatory authority.”
§ 445.1663(2) (West 2002).
On January 1, 2003, Wachovia Mortgage became a wholly
owned operating subsidiary of Wachovia Bank. Three
2 Michigan’s law exempts subsidiaries of national banks that maintain a
main office or branch office in Michigan. Mich. Comp. Laws Ann.
§§ 445.1652(1)(b) (West Supp. 2006), 445.1675(m) (West 2002), 493.53a(d)
(West 1998). Wachovia Bank has no such office in Michigan.

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Opinion of the Court
months later, Wachovia Mortgage advised the State of Michi
gan that it was surrendering its mortgage lending registra
tion. Because it had become an operating subsidiary of a
national bank, Wachovia Mortgage maintained, Michigan’s
registration and inspection requirements were preempted.
Watters responded with a letter advising Wachovia Mort
gage that it would no longer be authorized to conduct mort
gage lending activities in Michigan.
Wachovia Mortgage and Wachovia Bank filed suit against
Watters, in her official capacity as commissioner, in the
United States District Court for the Western District of
Michigan. They sought declaratory and injunctive relief
prohibiting Watters from enforcing Michigan’s registration
prescriptions against Wachovia Mortgage, and from interfer
ing with OCC’s exclusive visitorial authority. The NBA and
regulations promulgated thereunder, they urged, vest super
visory authority in OCC and preempt the application of the
state-law controls at issue. Specifically, Wachovia Mortgage
and Wachovia Bank challenged as preempted certain pro
visions of two Michigan statutes—the Mortgage Brokers,
Lenders, and Services Licensing Act and the Secondary
Mortgage Loan Act. The challenged provisions (1) require
mortgage lenders—including national bank operating sub
sidiaries but not national banks themselves—to register
and pay fees to the State before they may conduct banking
activities in Michigan, and authorize the commissioner to
deny or revoke registrations, §§ 445.1652(1) (West Supp.
2006), 445.1656(1)(d) (West 2002), 445.1657(1), 445.1658,
445.1679(1)(a), 493.52(1) (West 1998), 493.53a(d), 493.54,
493.55(4), 493.56a(2), and 493.61; (2) require submission of an
nual financial statements to the commissioner and retention
of certain documents in a particular format, §§ 445.1657(2)
(West 2002), 445.1671, 493.56a(2) (West 1998); (3) grant the
commissioner inspection and enforcement authority over
registrants, §§ 445.1661 (West 2002), 493.56b (West Supp.

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10 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
2005); and (4) authorize the commissioner to take regulatory
or enforcement actions against covered lenders, §§ 445.1665
(West 2002), 445.1666, 493.58–59, and 493.62a (West 1998).
In response, Watters argued that, because Wachovia Mort
gage was not itself a national bank, the challenged Michigan
controls were applicable and were not preempted. She also
contended that the Tenth Amendment to the Constitution of
the United States prohibits OCC’s exclusive superintendence
of national bank lending activities conducted through operat
ing subsidiaries.
The District Court granted summary judgment to the
banks in relevant part. 334 F. Supp. 2d 957, 966 (WD Mich.
2004). Invoking the two-step framework of Chevron
U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467
U. S. 837 (1984), the court deferred to the Comptroller’s de
termination that an operating subsidiary is subject to state
regulation only to the extent that the parent bank would be
if it performed the same functions. 334 F. Supp. 2d, at 963–
965 (citing, e. g., 12 CFR §§ 5.34(e)(3), 7.4006 (2004)). The
court also rejected Watters’ Tenth Amendment argument.
334 F. Supp. 2d, at 965–966. The Sixth Circuit affirmed.
431 F. 3d 556 (2005). We granted certiorari. 547 U. S.
1205 (2006).
II
A
Nearly 200 years ago, in McCulloch v. Maryland, 4 Wheat.
316 (1819), this Court held federal law supreme over state
law with respect to national banking. Though the bank at
issue in McCulloch was short-lived, a federal banking sys
tem reemerged in the Civil War era. See Atherton v. FDIC,
519 U. S. 213, 221–222 (1997); B. Hammond, Banks and Poli
tics in America: from the Revolution to the Civil War (1957).
In 1864, Congress enacted the NBA, establishing the system
of national banking still in place today. National Bank Act,

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11 Cite as: 550 U. S. 1 (2007)
Opinion of the Court
ch. 106, 13 Stat. 99; 3 Atherton, 519 U. S., at 222; Marquette
Nat. Bank of Minneapolis v. First of Omaha Service Corp.,
439 U. S. 299, 310, 314–315 (1978). The Act vested in nation
ally chartered banks enumerated powers and “all such inci
dental powers as shall be necessary to carry on the business
of banking.” 12 U. S. C. § 24 Seventh. To prevent incon
sistent or intrusive state regulation from impairing the na
tional system, Congress provided: “No national bank shall
be subject to any visitorial powers except as authorized by
Federal law . . . .” § 484(a).
In the years since the NBA’s enactment, we have repeat
edly made clear that federal control shields national banking
from unduly burdensome and duplicative state regulation.
See, e. g., Beneficial Nat. Bank v. Anderson, 539 U. S. 1, 10
(2003) (national banking system protected from “possible un
friendly State legislation” (quoting Tiffany v. National Bank
of Mo., 18 Wall. 409, 412 (1874))). Federally chartered banks
are subject to state laws of general application in their daily
business to the extent such laws do not conflict with the let
ter or the general purposes of the NBA. Davis v. Elmira
Savings Bank, 161 U. S. 275, 290 (1896). See also Atherton,
519 U. S., at 223. For example, state usury laws govern the
maximum rate of interest national banks can charge on loans,
12 U. S. C. § 85, contracts made by national banks “are gov
erned and construed by State laws,” National Bank v. Com
monwealth, 9 Wall. 353, 362 (1870), and national banks’ “ac
quisition and transfer of property [are] based on State law,”
ibid. However, “the States can exercise no control over [na
tional banks], nor in any wise affect their operation, except
in so far as Congress may see proper to permit. Any thing
beyond this is an abuse, because it is the usurpation of power
which a single State cannot give.” Farmers’ and Mechan
3 The Act of June 3, 1864, ch. 106, 13 Stat. 99, was originally entitled “An
Act to provide a National Currency . . . ”; its title was altered by Congress
in 1874 to “the National Bank Act.” Ch. 343, 18 Stat. 123.

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12 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
ics’ Nat. Bank v. Dearing, 91 U. S. 29, 34 (1875) (internal
quotation marks omitted).
We have “interpret[ed] grants of both enumerated and in
cidental ‘powers’ to national banks as grants of authority not
normally limited by, but rather ordinarily pre-empting, con
trary state law.” Barnett Bank of Marion Cty., N. A. v.
Nelson, 517 U. S. 25, 32 (1996). See also Franklin Nat.
Bank of Franklin Square v. New York, 347 U. S. 373, 375–
379 (1954). States are permitted to regulate the activities
of national banks where doing so does not prevent or sig
nificantly interfere with the national bank’s or the national
bank regulator’s exercise of its powers. But when state
prescriptions significantly impair the exercise of authority,
enumerated or incidental under the NBA, the State’s regu
lations must give way. Barnett Bank, 517 U. S., at 32–34
(federal law permitting national banks to sell insurance in
small towns preempted state statute prohibiting banks from
selling most types of insurance); Franklin Nat. Bank, 347
U. S., at 377–379 (local restrictions preempted because they
burdened exercise of national banks’ incidental power to
advertise).
The NBA authorizes national banks to engage in mortgage
lending, subject to OCC regulation. The Act provides:
“Any national banking association may make, arrange,
purchase or sell loans or extensions of credit secured by
liens on interests in real estate, subject to 1828(o) of
this title and such restrictions and requirements as the
Comptroller of the Currency may prescribe by regula
tion or order.” 12 U. S. C. § 371(a).4
4 Title 12 U. S. C. §1828(o) requires federal banking agencies to adopt
uniform regulations prescribing standards for real estate lending by de
pository institutions and sets forth criteria governing such standards.
See, e. g., § 1828(o)(2)(A) (“In prescribing standards . . . the agencies shall
consider—(i) the risk posed to the deposit insurance funds by such exten
sions of credit; (ii) the need for safe and sound operation of insured deposi
tory institutions; and (iii) the availability of credit.”).

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13 Cite as: 550 U. S. 1 (2007)
Opinion of the Court
Beyond genuine dispute, state law may not significantly
burden a national bank’s own exercise of its real estate lend
ing power, just as it may not curtail or hinder a national
bank’s efficient exercise of any other power, incidental or
enumerated under the NBA. See Barnett Bank, 517 U. S.,
at 33–34; Franklin, 347 U. S., at 375–379. See also 12 CFR
§ 34.4(a)(1) (2006) (identifying preempted state controls on
mortgage lending, including licensing and registration). In
particular, real estate lending, when conducted by a national
bank, is immune from state visitorial control: The NBA spe
cifically vests exclusive authority to examine and inspect in
OCC. 12 U. S. C. § 484(a) (“No national bank shall be subject
to any visitorial powers except as authorized by Federal
law.”).5
Harmoniously, the Michigan provisions at issue exempt
national banks from coverage. Mich. Comp. Laws Ann.
§ 445.1675(a) (West 2002). This is not simply a matter of the
Michigan Legislature’s grace. Cf. post, at 34, and n. 17.
For, as the parties recognize, the NBA would have preemp
tive force, i. e., it would spare a national bank from state
controls of the kind here involved. See Brief for Petitioner
12; Brief for Respondents 14; Brief for United States as Ami
cus Curiae 9. State laws that conditioned national banks’
real estate lending on registration with the State, and sub
jected such lending to the State’s investigative and enforce
ment machinery would surely interfere with the banks’ fed
erally authorized business: National banks would be subject
to registration, inspection, and enforcement regimes im
posed not just by Michigan, but by all States in which the
banks operate.6 Diverse and duplicative superintendence of
5 See also 2 R. Taylor, Banking Law § 37.02, p. 37–5 (2006) (“[OCC] has
exclusive authority to charter and examine [national] banks.” (footnote
omitted)).
6 See 69 Fed. Reg. 1908 (2004) (“The application of multiple, often unpre
dictable, different state or local restrictions and requirements prevents
[national banks] from operating in the manner authorized under Federal

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14 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
national banks’ engagement in the business of banking, we
observed over a century ago, is precisely what the NBA was
designed to prevent: “Th[e] legislation has in view the erec
tion of a system extending throughout the country, and inde
pendent, so far as powers conferred are concerned, of state
legislation which, if permitted to be applicable, might impose
limitations and restrictions as various and as numerous as
the States.” Easton v. Iowa, 188 U. S. 220, 229 (1903).
Congress did not intend, we explained, “to leave the field
open for the States to attempt to promote the welfare and
stability of national banks by direct legislation. . . . [C]on
fusion would necessarily result from control possessed and
exercised by two independent authorities.” Id., at 231–232.
Recognizing the burdens and undue duplication state con
trols could produce, Congress included in the NBA an ex
press command: “No national bank shall be subject to any
visitorial powers except as authorized by Federal law . . . .”
12 U. S. C. § 484(a). See supra, at 11–12, 13; post, at 31 (ac
knowledging that national banks have been “exemp[t] from
state visitorial authority . . . for more than 140 years”).
“Visitation,” we have explained “is the act of a superior or
superintending officer, who visits a corporation to examine
into its manner of conducting business, and enforce an ob
servance of its laws and regulations.” Guthrie v. Harkness,
199 U. S. 148, 158 (1905) (internal quotation marks omitted).
See also 12 CFR § 7.4000(a)(2) (2006) (defining “visitorial”
power as “(i) [e]xamination of a bank; (ii) [i]nspection of a
bank’s books and records; (iii) [r]egulation and supervision of
activities authorized or permitted pursuant to federal bank
ing law; and (iv) [e]nforcing compliance with any applicable
federal or state laws concerning those activities”). Michi
gan, therefore, cannot confer on its commissioner examina
law, is costly and burdensome, interferes with their ability to plan their
business and manage their risks, and subjects them to uncertain liabilities
and potential exposure.”).

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Opinion of the Court
tion and enforcement authority over mortgage lending, or
any other banking business done by national banks.7
B
While conceding that Michigan’s licensing, registration,
and inspection requirements cannot be applied to national
banks, see, e. g., Brief for Petitioner 10, 12, Watters argues
that the State’s regulatory regime survives preemption with
respect to national banks’ operating subsidiaries. Because
such subsidiaries are separately chartered under some
State’s law, Watters characterizes them simply as “affiliates”
of national banks, and contends that even though they are
subject to OCC’s superintendence, they are also subject to
multistate control. Id., at 17–22. We disagree.
Since 1966, OCC has recognized the “incidental” authority
of national banks under § 24 Seventh to do business through
7 Ours is indeed a “dual banking system.” See post, at 22–26, 43. But
it is a system that has never permitted States to license, inspect, and
supervise national banks as they do state banks. The dissent repeatedly
refers to the policy of “competitive equality” featured in First Nat. Bank
in Plant City v. Dickinson, 396 U. S. 122, 131 (1969). See post, at 25, 35,
40, 43. Those words, however, should not be ripped from their context.
Plant City involved the McFadden Act (Branch Banks), 44 Stat. 1228, 12
U. S. C. § 36, in which Congress expressly authorized national banks to
establish branches “only when, where, and how state law would authorize
a state bank to establish and operate such [branches].” 396 U. S., at 130.
See also id., at 131 (“[W]hile Congress has absolute authority over national
banks, the [McFadden Act] has incorporated by reference the limitations
which state law places on branch banking activities by state banks. Con
gress has deliberately settled upon a policy intended to foster competitive
equality. . . . [The] Act reflects the congressional concern that neither sys
tem ha[s] advantages over the other in the use of branch banking.” (quot
ing First Nat. Bank of Logan v. Walker Bank & Trust Co., 385 U. S. 252,
261 (1966))). “[W]here Congress has not expressly conditioned the grant
of ‘power’ upon a grant of state permission, the Court has ordinarily found
that no such condition applies.” Barnett Bank of Marion Cty., N. A. v.
Nelson, 517 U. S. 25, 34 (1996). The NBA provisions before us, unlike the
McFadden Act, do not condition the exercise of power by national banks
on state allowance of similar exercises by state banks. See supra, at 13.

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16 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
operating subsidiaries. See 31 Fed. Reg. 11459–11460
(1966); 12 CFR § 5.34(e)(1) (2006) (“A national bank may con
duct in an operating subsidiary activities that are permissi
ble for a national bank to engage in directly either as part
of, or incidental to, the business of banking . . . .”). That
authority is uncontested by Michigan’s commissioner. See
Brief for Petitioner 21 (“[N]o one disputes that 12 USC § 24
(Seventh) authorizes national banks to use nonbank operat
ing subsidiaries . . . .”). OCC licenses and oversees national
bank operating subsidiaries just as it does national banks.
§ 5.34(e)(3) (“An operating subsidiary conducts activities au
thorized under this section pursuant to the same authoriza
tion, terms and conditions that apply to the conduct of such
activities by its parent national bank.”); 8 United States Of
fice of the Comptroller of the Currency, Related Organiza
tions: Comptroller’s Handbook 53 (Aug. 2004) (hereinafter
Comptroller’s Handbook) (“Operating subsidiaries are sub
ject to the same supervision and regulation as the parent
bank, except where otherwise provided by law or OCC
regulation.”).
In 1999, Congress defined and regulated “financial” sub
sidiaries; simultaneously, Congress distinguished those na
tional bank affiliates from subsidiaries—typed “operating
subsidiaries” by OCC—which may engage only in activi
ties national banks may engage in directly, “subject to the
same terms and conditions that govern the conduct of such
activities by national banks.” Gramm-Leach-Bliley Act
(GLBA), § 121(a)(2), 113 Stat. 1378 (codified at 12 U. S. C.
8 The regulation further provides:
“If, upon examination, the OCC determines that the operating subsidiary
is operating in violation of law, regulation, or written condition, or in an
unsafe or unsound manner or otherwise threatens the safety or soundness
of the bank, the OCC will direct the bank or operating subsidiary to take
appropriate remedial action, which may include requiring the bank to di
vest or liquidate the operating subsidiary, or discontinue specified activi
ties.” 12 CFR § 5.34(e)(3) (2006).

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17 Cite as: 550 U. S. 1 (2007)
Opinion of the Court
§ 24a(g)(3)(A)).9 For supervisory purposes, OCC treats na
tional banks and their operating subsidiaries as a single eco
nomic enterprise. Comptroller’s Handbook 64. OCC over
sees both entities by reference to “business line,” applying
the same controls whether banking “activities are conducted
directly or through an operating subsidiary.” Ibid.10
As earlier noted, Watters does not contest the authority of
national banks to do business through operating subsidiaries.
Nor does she dispute OCC’s authority to supervise and regu
late operating subsidiaries in the same manner as national
banks. Still, Watters seeks to impose state regulation on
operating subsidiaries over and above regulation undertaken
by OCC. But just as duplicative state examination, supervi
sion, and regulation would significantly burden mortgage
lending when engaged in by national banks, see supra, at
9 OCC subsequently revised its regulations to track the statute. See
§ 5.34(e)(1), (3); Financial Subsidiaries and Operating Subsidiaries, 65 Fed.
Reg. 12905, 12911 (2000). Cf. post, at 29, 30 (dissent’s grudging acknowl
edgment that Congress “may have acquiesced” in OCC’s position that na
tional banks may engage in “the business of banking” through operating
subsidiaries empowered to do only what the bank itself can do).
10 For example, “for purposes of applying statutory or regulatory limits,
such as lending limits or dividend restrictions,” e. g., 12 U. S. C. §§ 56, 60,
84, 371d, “[t]he results of operations of operating subsidiaries are consoli
dated with those of its parent.” Comptroller’s Handbook 64. Likewise,
for accounting and regulatory reporting purposes, an operating subsidiary
is treated as part of the member bank; assets and liabilities of the two
entities are combined. See 12 CFR §§ 5.34(e)(4)(i), 223.3(w) (2006). OCC
treats financial subsidiaries differently. A national bank may not consoli
date the assets and liabilities of a financial subsidiary with those of the
bank. Comptroller’s Handbook 64. It cannot be fairly maintained “that
the transfer in 2003 of [Wachovia Mortgage’s] ownership from the holding
company to the Bank” resulted in no relevant changes to the company’s
business. Compare post, at 35, with supra, at 16, n. 8. On becoming
Wachovia’s operating subsidiary, Wachovia Mortgage became subject to
the same terms and conditions as national banks, including the full super
visory authority of OCC. This change exposed the company to signifi
cantly more federal oversight than it experienced as a state nondeposi
tory institution.

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18 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
11–15, so too would those state controls interfere with that
same activity when engaged in by an operating subsidiary.
We have never held that the preemptive reach of the NBA
extends only to a national bank itself. Rather, in analyzing
whether state law hampers the federally permitted activities
of a national bank, we have focused on the exercise of a na
tional bank’s powers, not on its corporate structure. See,
e. g., Barnett Bank, 517 U. S., at 32. And we have treated
operating subsidiaries as equivalent to national banks with
respect to powers exercised under federal law (except where
federal law provides otherwise). In NationsBank of N. C.,
N. A., 513 U. S., at 256–261, for example, we upheld OCC’s
determination that national banks had “incidental” authority
to act as agents in the sale of annuities. It was not material
that the function qualifying as within “the business of bank
ing,” § 24 Seventh, was to be carried out not by the bank
itself, but by an operating subsidiary, i. e., an entity “subject
to the same terms and conditions that govern the conduct of
[the activity] by national banks [themselves],” § 24a(g)(3)(A);
12 CFR § 5.34(e)(3) (2006). See also Clarke v. Securities In
dustry Assn., 479 U. S. 388 (1987) (national banks, acting
through operating subsidiaries, have power to offer discount
brokerage services).11
Security against significant interference by state regula
tors is a characteristic condition of the “business of banking”
conducted by national banks, and mortgage lending is one
aspect of that business. See, e. g., 12 U. S C. § 484(a); 12
CFR § 34.4(a)(1) (2006). See also supra, at 11–15; post, at 27
(acknowledging that, in 1982, Congress broadly authorized
national banks to engage in mortgage lending); post, at 36–
37, and n. 20 (acknowledging that operating subsidiaries “are
subject to the same federal oversight as their national bank
11 Cf. Marquette Nat. Bank of Minneapolis v. First of Omaha Service
Corp., 439 U. S. 299, 308, and n. 19 (1978) (holding that national bank may
charge home State’s interest rate, regardless of more restrictive usury
laws in borrower’s State, but declining to consider operating subsidiaries).

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19 Cite as: 550 U. S. 1 (2007)
Opinion of the Court
parents”). That security should adhere whether the busi
ness is conducted by the bank itself or is assigned to an oper
ating subsidiary licensed by OCC whose authority to carry
on the business coincides completely with that of the bank.
See Wells Fargo Bank, N. A. v. Boutris, 419 F. 3d 949, 960
(CA9 2005) (determination whether to conduct business
through operating subsidiaries or through subdivisions is
“essentially one of internal organization”).
Watters contends that if Congress meant to deny States
visitorial powers over operating subsidiaries, it would have
written § 484(a)’s ban on state inspection to apply not only to
national banks but also to their affiliates. She points out
that § 481, which authorizes OCC to examine “affiliates” of
national banks, does not speak to state visitorial powers.
This argument fails for two reasons. First, one cannot as
cribe any intention regarding operating subsidiaries to the
1864 Congress that enacted §§ 481 and 484, or the 1933 Con
gress that added the provisions on examining affiliates to
§ 481 and the definition of “affiliate” to § 221a. That is so
because operating subsidiaries were not authorized until
1966. See supra, at 15–16. Over the past four decades,
during which operating subsidiaries have emerged as im
portant instrumentalities of national banks, Congress and
OCC have indicated no doubt that such subsidiaries are “sub
ject to the same terms and conditions” as national banks
themselves.
Second, Watters ignores the distinctions Congress recog
nized among “affiliates.” The NBA broadly defines the term
“affiliate” to include “any corporation” controlled by a na
tional bank, including a subsidiary. See 12 U. S. C. § 221a(b).
An operating subsidiary is therefore one type of “affiliate.”
But unlike affiliates that may engage in functions not author
ized by the NBA, e. g., financial subsidiaries, an operating
subsidiary is tightly tied to its parent by the specification
that it may engage only in “the business of banking” as au
thorized by the Act. § 24a(g)(3)(A); 12 CFR § 5.34(e)(1)

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20 WATTERS v. WACHOVIA BANK, N. A.
Opinion of the Court
(2006). See also supra, at 16–17, and n. 10. Notably, when
Congress amended the NBA confirming that operating sub
sidiaries may “engag[e] solely in activities that national
banks are permitted to engage in directly,” 12 U. S. C.
§ 24a(g)(3)(A), it did so in an Act, the GLBA, providing that
other affiliates, authorized to engage in nonbanking financial
activities, e. g., securities and insurance, are subject to state
regulation in connection with those activities. See, e. g.,
§§ 1843(k), 1844(c)(4). See also 15 U. S. C. § 6701(b) (any per
son who sells insurance must obtain a state license to do
so).12
C
Recognizing the necessary consequence of national banks’
authority to engage in mortgage lending through an operat
ing subsidiary “subject to the same terms and conditions that
govern the conduct of such activities by national banks,” 12
U. S. C. § 24a(g)(3)(A), see also § 24 Seventh, OCC promul
gated 12 CFR § 7.4006 (2006): “Unless otherwise provided by
Federal law or OCC regulation, State laws apply to national
bank operating subsidiaries to the same extent that those
laws apply to the parent national bank.” See Investment
Securities; Bank Activities and Operations; Leasing, 66 Fed.
Reg. 34784, 34788 (2001). Watters disputes the authority of
OCC to promulgate this regulation and contends that, be
cause preemption is a legal question for determination by
courts, § 7.4006 should attract no deference. See also post,
at 38–43. This argument is beside the point, for under our
interpretation of the statute, the level of deference owed
to the regulation is an academic question. Section 7.4006
12 The dissent protests that the GLBA does not itself preempt the Michi
gan provisions at issue. Cf. post, at 36–38. We express no opinion on
that matter. Our point is more modest: The GLBA simply demonstrates
Congress’ formal recognition that national banks have incidental power to
do business through operating subsidiaries. See supra, at 16–17; cf. post,
at 30–31.

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21 Cite as: 550 U. S. 1 (2007)
Opinion of the Court
merely clarifies and confirms what the NBA already conveys:
A national bank has the power to engage in real estate lend
ing through an operating subsidiary, subject to the same
terms and conditions that govern the national bank itself;
that power cannot be significantly impaired or impeded by
state law. See, e. g., Barnett Bank, 517 U. S., at 33–34; 12
U. S. C. §§ 24 Seventh, 24a(g)(3)(A), 371.13
The NBA is thus properly read by OCC to protect from
state hindrance a national bank’s engagement in the “busi
ness of banking” whether conducted by the bank itself or by
an operating subsidiary, empowered to do only what the bank
itself could do. See supra, at 16–17. The authority to en
gage in the business of mortgage lending comes from the
NBA, § 371, as does the authority to conduct business
through an operating subsidiary. See §§ 24 Seventh,
24a(g)(3)(A). That Act vests visitorial oversight in OCC,
not state regulators. § 484(a). State law (in this case,
North Carolina law), all agree, governs incorporation-related
issues, such as the formation, dissolution, and internal gover
nance of operating subsidiaries.14 And the laws of the
States in which national banks or their affiliates are located
govern matters the NBA does not address. See supra,
at 11. But state regulators cannot interfere with the “busi
ness of banking” by subjecting national banks or their
OCC-licensed operating subsidiaries to multiple audits and
surveillance under rival oversight regimes.
13 Because we hold that the NBA itself—independent of OCC’s regula
tion—preempts the application of the pertinent Michigan laws to national
bank operating subsidiaries, we need not consider the dissent’s lengthy
discourse on the dangers of vesting preemptive authority in administra
tive agencies. See post, at 38–43; cf. post, at 43, 44 (maintaining that
“[w]hatever the Court says, this is a case about an administrative agency’s
power to preempt state laws,” and accusing the Court of “endors[ing] ad
ministrative action whose sole purpose was to preempt state law rather
than to implement a statutory command”).
14 Watters does not assert that Wachovia Mortgage is out of compliance
with any North Carolina law governing its corporate status.

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22 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
III
Watters’ alternative argument, that 12 CFR § 7.4006 vio
lates the Tenth Amendment to the Constitution, is un
availing. As we have previously explained, “[i]f a power
is delegated to Congress in the Constitution, the Tenth
Amendment expressly disclaims any reservation of that
power to the States.” New York v. United States, 505 U. S.
144, 156 (1992). Regulation of national bank operations is a
prerogative of Congress under the Commerce and Necessary
and Proper Clauses. See Citizens Bank v. Alafabco, Inc.,
539 U. S. 52, 58 (2003) (per curiam). The Tenth Amend
ment, therefore, is not implicated here.
* * *
For the reasons stated, the judgment of the Sixth Circuit
is
Affirmed.
Justice Thomas took no part in the consideration or deci
sion of this case.
Justice Stevens, with whom The Chief Justice and
Justice Scalia join, dissenting.
Congress has enacted no legislation immunizing national
bank subsidiaries from compliance with nondiscriminatory
state laws regulating the business activities of mortgage bro
kers and lenders. Nor has it authorized an executive agency
to pre-empt such state laws whenever it concludes that they
interfere with national bank activities. Notwithstanding
the absence of relevant statutory authority, today the Court
endorses an agency’s incorrect determination that the laws
of a sovereign State must yield to federal power. The sig
nificant impact of the Court’s decision on the federal-state
balance and the dual banking system makes it appropriate
to set forth in full the reasons for my dissent.

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23 Cite as: 550 U. S. 1 (2007)
Stevens, J., dissenting
I
The National Bank Act (or NBA), 13 Stat. 99, authorized
the incorporation of national banks, § 5, id., at 100, and
granted them “all such incidental powers as shall be neces
sary to carry on the business of banking,” § 8, id., at 101,
(codified at 12 U. S. C. § 24 Seventh), subject to regulatory
oversight by the Comptroller of the Currency, § 54, 13 Stat.
116. To maintain a meaningful role for state legislation and
for state corporations that did not engage in core banking
activities, Congress circumscribed national bank authority.
Notably, national banks were expressly prohibited from mak
ing mortgage loans, § 28, id., at 108.1 Moreover, the shares
of national banks, as well their real estate holdings, were
subject to nondiscriminatory state taxation, § 41, id., at 111;
and while national banks could lend money, state law capped
the interest rates they could charge, § 30, id., at 108.
Originally, it was anticipated that “existing banks would
surrender their state charters and re-incorporate under the
terms of the new law with national charters.” 2 That
did not happen. Instead, after an initial post-National Bank
Act decline, state-chartered institutions thrived.3 What
emerged was the competitive mix of state and national banks
known as the dual banking system.
This Court has consistently recognized that because fed
eral law is generally interstitial, national banks must comply
1 “There is no more characteristic difference between the state and the
national banking laws than the fact that almost without exception, state
banks may loan on real estate security, while national banks are prohibited
from doing so.” G. Barnett, State Banking in the United States Since the
Passage of the National Bank Act 50 (1902) (reprint 1983) (hereinafter
Barnett).
2 B. Hammond, Banks and Politics in America: from the Revolution to
the Civil War 728 (1957).
3 Id., at 733. See also Barnett 73–74 (estimating that more than 800
state banks were in operation in 1877, and noting the “remarkable increase
in the number of state banks” during the last two decades of the 19th
century).

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24 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
with most of the same rules as their state counterparts. As
early as 1870, we articulated the principle that has remained
the lodestar of our jurisprudence: that national banks
“are only exempted from State legislation, so far as that
legislation may interfere with, or impair their efficiency
in performing the functions by which they are designed
to serve that government. . . . They are subject to the
laws of the State, and are governed in their daily course
of business far more by the laws of the State than of the
nation. All their contracts are governed and construed
by State laws. Their acquisition and transfer of prop
erty, their right to collect their debts, and their liability
to be sued for debts, are all based on State law. It is
only when the State law incapacitates the banks from
discharging their duties to the government that it be
comes unconstitutional.” National Bank v. Common
wealth, 9 Wall. 353, 362 (1870) (emphasis added).4
Until today, we have remained faithful to the principle that
nondiscriminatory laws of general application that do not
“forbid” or “impair significantly” national bank activities
should not be pre-empted. See, e. g., Barnett Bank of Mar
ion Cty., N. A. v. Nelson, 517 U. S. 25, 33 (1996).5
4 See also McClellan v. Chipman, 164 U. S. 347, 357 (1896) (explaining
that our cases establish “a rule and an exception, the rule being the opera
tion of general state laws upon the dealings and contracts of national
banks, the exception being the cessation of the operation of such laws
whenever they expressly conflict with the laws of the United States or
frustrate the purpose for which the national banks were created, or impair
their efficiency to discharge the duties imposed upon them by the law of
the United States”).
5 See also Anderson Nat. Bank v. Luckett, 321 U. S. 233, 248 (1944)
(“This Court has often pointed out that national banks are subject to state
laws, unless those laws infringe the national banking laws or impose an
undue burden on the performance of the banks’ functions”); Davis v. El
mira Savings Bank, 161 U. S. 275, 290 (1896) (“Nothing, of course, in this
opinion is intended to deny the operation of general and undiscriminating
state laws on the contracts of national banks, so long as such laws do not

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25 Cite as: 550 U. S. 1 (2007)
Stevens, J., dissenting
Nor is the Court alone in recognizing the vital role that
state legislation plays in the dual banking system. Al
though the dual banking system’s main virtue is its diver
gent treatment of national and state banks,6 Congress has
consistently recognized that state law must usually govern
the activities of both national and state banks for the dual
banking system to operate effectively. As early as 1934,
Justice Brandeis observed for the Court that this congres
sional recognition is embodied in a long string of statutes:
“The policy of equalization was adopted in the National
Bank Act of 1864, and has ever since been applied, in
the provision concerning taxation. In amendments to
that Act and in the Federal Reserve Act and amend
ments thereto the policy is expressed in provisions con
ferring power to establish branches; in those conferring
power to act as fiduciary; in those concerning interest
on deposits; and in those concerning capitalization. It
appears also to have been of some influence in securing
the grant in 1913 of the power to loan on mortgage.”
Lewis v. Fidelity & Deposit Co. of Md., 292 U. S. 559,
564–565 (footnotes, with citations to relevant statutes,
omitted).7
For the same reasons, we observed in First Nat. Bank in
Plant City v. Dickinson, 396 U. S. 122, 133 (1969), that “[t]he
policy of competitive equality is . . . firmly embedded in the
statutes governing the national banking system.” So firmly
embedded, in fact, that “the congressional policy of competi
conflict with the letter or the general objects and purposes of Congres
sional legislation”).
6 See Scott, The Dual Banking System: A Model of Competition in Regu
lation, 30 Stan. L. Rev. 1, 8–13 (1978) (explaining the perceived benefits of
the dual banking system).
7 See also First Nat. Bank of Logan v. Walker Bank & Trust Co., 385
U. S. 252, 261 (1966) (observing that in passing the McFadden Act, “Con
gress was continuing its policy of equalization first adopted in the National
Bank Act of 1864”).

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26 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
tive equality with its deference to state standards” is not
“open to modification by the Comptroller of the Currency.”
Id., at 138.
II
Although the dual banking system has remained intact,
Congress has radically transformed the national bank system
from its Civil War antecedent and brought considerably more
federal authority to bear on state-chartered institutions.
Yet despite all the changes Congress has made to the na
tional bank system, and despite its exercise of federal power
over state banks, it has never pre-empted state laws like
those at issue in this case.
Most significantly, in 1913 Congress established the Fed
eral Reserve System to oversee federal monetary policy
through its influence over the availability of credit. Federal
Reserve Act §§ 2, 9, 38 Stat. 252, 259. The Act required na
tional banks and permitted state banks to become Federal
Reserve member banks, and subjected all member banks to
Federal Reserve regulations and oversight. Ibid. Also of
signal importance, after the banking system collapsed during
the Great Depression, Congress required all member banks
to obtain deposit insurance from the newly established Fed
eral Deposit Insurance Corporation. Banking Act of 1933
(or Glass-Steagall Act), § 8, 48 Stat. 168; see also Banking Act
of 1935, 49 Stat. 684. Although both of these steps meant
that many state banks were subjected to significant federal
regulation,8 “the state banking system continued along with
the national banking system, with no attempt to exercise
preemptive federal regulatory authority over the activities
of the existing state banks.” M. Malloy, Banking and Finan
cial Services Law 48 (2d ed. 2005).
8 What has emerged are “two interrelated systems in which most state
chartered banks are subject to varying degrees of federal regulation, and
where state laws are made applicable, to a varying extent, to federally
chartered institutions.” 1 A. Graham, Banking Law § 1.04, p. 1–12 (Nov.
2006).

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27 Cite as: 550 U. S. 1 (2007)
Stevens, J., dissenting
In addition to these systemic overhauls, Congress has over
time modified the powers of national banks. The changes
are too various to recount in detail, but two are of particular
importance to this case. First, Congress has gradually re
laxed its prohibition on mortgage lending by national banks.
In 1913, Congress permitted national banks to make loans
secured by farm land, Federal Reserve Act, § 24, 38 Stat. 273,
and in succeeding years, their mortgage lending power was
enlarged to cover loans on real estate in the vicinity of the
bank, Act of Sept. 7, 1916, §24, 39 Stat. 754, and loans “se
cured by first liens upon forest tracts which are properly
managed in all respects,” Act of Aug. 15, 1953, ch. 510, 67
Stat. 614. Congress substantially expanded national banks’
power to make real estate loans in 1974, see Housing and
Community Development Act, Title VII, § 711, 88 Stat. 716,
and in 1982 it enacted the broad language, now codified at 12
U. S. C. § 371(a), authorizing national banks to make “loans
. . . secured by liens on interests in real estate.” Garn-St
Germain Depository Institutions Act of 1982, Title IV, § 403,
96 Stat. 1510. While these changes have enabled national
banks to engage in more evenhanded competition with state
banks, they certainly reflect no purpose to give them any
competitive advantage.9
Second, Congress has over the years both curtailed and
expanded the ability of national banks to affiliate with other
companies. In the early part of the century, banks routinely
engaged in investment activities and affiliated with compa
nies that did the same. The Glass-Steagall Act put an end
to that. “[E]nacted in 1933 to protect bank depositors from
any repetition of the widespread bank closings that occurred
9 It is noteworthy that the principal cases that the Court cites to support
its conclusion that the federal statute itself pre-empts the Michigan laws
were decided years before Congress authorized national banks to engage
in mortgage lending and years before the Office of the Comptroller of the
Currency (OCC) authorized their use of operating subsidiaries. See ante,
at 11–12, 14.

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28 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
during the Great Depression,” Board of Governors, FRS v.
Investment Company Institute, 450 U. S. 46, 61 (1981),
Glass-Steagall prohibited Federal Reserve member banks
(both state and national) from affiliating with investment
banks.10 In Congress’ view, the affiliates had engaged in
speculative activities that in turn contributed to commercial
banks’ Depression-era failures.11 It was this focus on the
welfare of depositors—as opposed to stockholders—that pro
vided the basis for legislative action designed to ensure
bank solvency.
A scant two years later, Congress forbade national banks
from owning the shares of any company because of a similar
fear that such ownership could undermine the safety and
soundness of national banks:12 “Except as hereinafter pro
vided or otherwise permitted by law, nothing herein con
tained shall authorize the purchase by [a national bank] for
its own account of any shares of stock of any corporation.”
Banking Act of 1935, § 308(b), 49 Stat. 709 (emphasis added).
That provision remains on the books today. See 12 U. S. C.
§ 24 Seventh.
These congressional restrictions did not forbid all affilia
tions, however, and national banks began experimenting
with new corporate forms. One of those forms involved the
national bank ownership of “operating subsidiaries.” In
1966, the Comptroller of the Currency took the position “that
10 In Investment Company Institute v. Camp, 401 U. S. 617 (1971), we
set aside a regulation issued by the Comptroller of the Currency authoriz
ing banks to operate collective investment funds because that activity was
prohibited by the Glass-Steagall Act. Similarly, in Securities Industry
Assn. v. Board of Governors, FRS, 468 U. S. 137 (1984), the Glass-Steagall
Act provided the basis for invalidating a regulation authorizing banks to
enter the business of selling third-party commercial paper.
11 See J. Macey, G. Miller, & R. Carnell, Banking Law and Regulation 21
(3d ed. 2001) (describing “the alleged misdeeds of the large banks’ securi
ties affiliates and the ways in which such affiliations could promote un
sound lending, irresponsible speculation, and conflicts of interest”).
12 See 31 Fed. Reg. 11459 (1966).

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29 Cite as: 550 U. S. 1 (2007)
Stevens, J., dissenting
a national bank may acquire and hold the controlling stock
interest in a subsidiary operations corporation” so long as
that corporation’s “functions or activities . . . are limited to
one or several of the functions or activities that a national
bank is authorized to carry on.” 31 Fed. Reg. 11459 (1966).
The Comptroller declined to read the categorical prohibition
on national bank ownership of stock to foreclose bank owner
ship of operating subsidiaries, finding authority for this ag
gressive interpretation of national bank authority in the “in
cidental powers” provision of 12 U. S. C. § 24 Seventh. See
31 Fed. Reg. 11460.
While Congress eventually restricted some of the new cor
porate structures,13 it neither disavowed nor endorsed the
Comptroller’s position on national bank ownership of op
erating subsidiaries. Notwithstanding the congressional
silence, in 1996 the OCC once again attempted to expand
national banks’ ownership powers. The agency issued a
regulation permitting national bank operating subsidiaries
to undertake activities that the bank was not allowed to en
gage in directly. 12 CFR §§ 5.34(d), (f) (1997) (authorizing
national banks to “acquire or establish an operating subsid
iary to engage in [activities] different from that permissible
for the parent national bank,” so long as those activities are
“part of or incidental to the business of banking, as deter
mined by the Comptroller of the Currency”); see also 61 Fed.
Reg. 60342 (1996).
Congress overruled this OCC regulation in 1999 in the
Gramm-Leach-Bliley Act (GLBA), 113 Stat. 1338. The
GLBA was a seminal piece of banking legislation inasmuch
as it repealed the Glass-Steagall Act’s ban on affiliations be
tween commercial and investment banks. See § 101, id., at
1341. More relevant to this case, however, the GLBA ad
dressed the powers of national banks to own subsidiary cor
porations. The Act provided that any national bank subsid
13 See Bank Holding Company Act of 1956, 70 Stat. 133; Bank Holding
Company Act Amendments of 1970, 84 Stat. 1760.

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30 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
iary engaging in activities forbidden to the parent bank
would be considered a “financial subsidiary,” § 121, id., at
1380, and would be subjected to heightened regulatory obli
gations, see, e. g., 12 U. S. C. § 371c–1(a)(1). The GLBA’s
definition of “financial subsidiaries” excluded those subsidiar
ies that “engag[e] solely in activities that national banks are
permitted to engage in directly and are conducted subject to
the same terms and conditions that govern the conduct of
such activities by national banks.” § 24a(g)(3).
By negative implication, then, only subsidiaries engaging
in purely national bank activities—which the OCC had
termed “operating subsidiaries,” but which the GLBA never
mentions by name—could avoid being subjected to the re
strictions that applied to financial subsidiaries. Compare
§ 371c(b)(2) (exempting subsidiaries from certain regulatory
restrictions) with § 371c(e) (clarifying that financial subsidi
aries are not to be treated as “subsidiaries”). Taken to
gether, these provisions worked a rejection of the OCC’s po
sition that an operating subsidiary could engage in activities
that national banks could not engage in directly.14 See
§ 24a(g)(3). Apart from this implicit rejection of the OCC’s
1996 regulation, however, the GLBA does not even mention
operating subsidiaries.
In sum, Congress itself has never authorized national
banks to use subsidiaries incorporated under state law to
perform traditional banking functions. Nor has it author
ized the OCC to “license” any state-chartered entity to do so.
The fact that it may have acquiesced in the OCC’s expansive
14 While the statutory text provides ample support for this conclusion,
it is noteworthy that it was so understood by contemporary commentators.
See, e. g., 145 Cong. Rec. 29681 (1999) (“Recently, the Comptroller of the
Currency has interpreted section 24 (Seventh) of the National Bank Act
to permit national banks to own and control subsidiaries engaged in activi
ties that national banks cannot conduct directly. These decisions and the
legal reasoning therein are erroneous and contrary to the law. The
[GLBA] overturns these decisions . . . ” (statement of Representative
Bliley)).

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31 Cite as: 550 U. S. 1 (2007)
Stevens, J., dissenting
interpretation of its authority is a plainly insufficient basis
for finding pre-emption.
III
It is familiar learning that “[t]he purpose of Congress is
the ultimate touchstone of pre-emption analysis.” Cipol
lone v. Liggett Group, Inc., 505 U. S. 504, 516 (1992) (internal
quotation marks omitted). In divining that congressional
purpose, I would have hoped that the Court would hew both
to the NBA’s text and to the basic rule, central to our federal
system, that “[i]n all pre-emption cases . . . we ‘start with
the assumption that the historic police powers of the States
were not to be superseded by the Federal Act unless that
was the clear and manifest purpose of Congress.’ ” Med
tronic, Inc. v. Lohr, 518 U. S. 470, 485 (1996) (quoting Rice v.
Santa Fe Elevator Corp., 331 U. S. 218, 230 (1947)). Had it
done so, it could have avoided the untenable conclusion that
Congress meant the NBA to pre-empt the state laws at
issue here.
The NBA in fact evinces quite the opposite congressional
purpose. It provides in 12 U. S. C. § 484(a) that “[n]o na
tional bank shall be subject to any visitorial powers except
as authorized by Federal law.” Although this exemption
from state visitorial authority has been in place for more
than 140 years, see § 54, 13 Stat. 116 (national banks “shall
not be subject to any other visitorial powers than such as
are authorized by this act”), it is significant that Congress
has never extended 12 U. S. C. § 484(a)’s pre-emptive blanket
to cover national bank subsidiaries.
This is not, contrary to the Court’s suggestion, see ante,
at 19–20, some kind of oversight. As the complex history
of the banking laws demonstrates, Congress has legislated
extensively with respect to national bank “affiliates”—an op
erating subsidiary is one type of affiliate 15—and has more
15 See 12 U. S. C. § 221a(b) (defining affiliates to include “any corporation”
that a federal member bank owns or controls).

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32 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
over given the OCC extensive supervisory powers over
those affiliates, see § 481 (providing that a federal examiner
“shall have power to make a thorough examination of all the
affairs of [a national bank] affiliate, and in doing so he shall
have power . . . to make a report of his findings to the Comp
troller of the Currency”). That Congress lavished such
attention on national bank affiliates and conferred such
far-reaching authority on the OCC without ever expanding
the scope of § 484(a) speaks volumes about Congress’ pre
emptive intent, or rather its lack thereof. Consistent with
our presumption against pre-emption—a presumption I do
not understand the Court to reject—I would read § 484(a)
to reflect Congress’ considered judgment not to pre-empt
the application of state visitorial laws to national bank
“affiliates.”
Instead, the Court likens § 484(a) to a congressional after
thought, musing that it merely “[r]ecogniz[es] the burdens
and undue duplication state controls could produce.” Ante,
at 14. By that logic, I take it the Court believes that the
NBA would impliedly pre-empt all state visitorial laws as
applied to national banks even if § 484(a) did not exist.
That is surprising and unlikely. Not only would it reduce
the NBA’s express pre-emption provision to so much surplus
age, but it would give Congress’ silence greater statutory
dignity than an express command. Perhaps that explains
why none of the four Circuits to have addressed this issue
relied on the pre-emptive force of the NBA itself. Each in
stead asked whether the OCC’s regulations pre-empted state
laws.16 Stranger still, the Court’s reasoning would suggest
16 See National City Bank of Indiana v. Turnbaugh, 463 F. 3d 325,
331–334 (CA4 2006) (holding that state law conflicted with the OCC regu
lations, not with the NBA); Wachovia Bank, N. A. v. Burke, 414 F. 3d 305,
315–316 (CA2 2005) (same); 431 F. 3d 556, 560–563 (CA6 2005) (case below)
(same); Wells Fargo Bank N. A. v. Boutris, 419 F. 3d 949, 962–967 (CA9
2005) (same).

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33 Cite as: 550 U. S. 1 (2007)
Stevens, J., dissenting
that operating subsidiaries have been exempted from state
visitorial authority from the moment the OCC first author
ized them in 1966. See 31 Fed. Reg. 11459. Yet if that
were true, surely at some point over the last 40 years some
national bank would have gone to court to spare its subsidi
aries from the yoke of state regulation; national banks are
neither heedless of their rights nor shy of litigation. But
respondents point us to no such cases that predate the OCC’s
pre-emption regulations.
The Court licenses itself to ignore § 484(a)’s limits by rea
soning that “when state prescriptions significantly impair
the exercise of authority, enumerated or incidental under the
NBA, the State’s regulations must give way.” Ante, at 12.
But it intones this “significant impairment” refrain without
remembering that it merely provides a useful tool—not the
only tool, and not even the best tool—to discover congres
sional intent. As we explained in Barnett Bank, this Court
“take[s] the view that normally Congress would not want
States to forbid, or to impair significantly, the exercise of a
power that Congress explicitly granted.” 517 U. S., at 33
(emphasis added). But any assumption about what Con
gress “normally” wants is of little moment when Congress
has said exactly what it wants.
The Court also puts great weight on Barnett Bank’s refer
ence to our “history . . . of interpreting grants of both enu
merated and incidental ‘powers’ to national banks as grants
of authority not normally limited by, but rather ordinarily
pre-empting, contrary state law.” Id., at 32. The Court ne
glects to mention that Barnett Bank is quite clear that this
interpretive rule applies only when Congress has failed (as
it often does) to manifest an explicit pre-emptive intent.
Id., at 31. “In that event, courts must consider whether the
federal statute’s ‘structure and purpose,’ or nonspecific stat
utory language, nonetheless reveal a clear, but implicit, pre
emptive intent.” Ibid. (emphasis added). Barnett Bank

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34 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
nowhere holds that we can ignore strong indicia of congres
sional intent whenever a state law arguably trenches on na
tional bank powers. After all, the case emphasized that the
question of pre-emption “is basically one of congressional in
tent. Did Congress, in enacting the Federal Statute, intend
to exercise its constitutionally delegated authority to set
aside the laws of a State?” Id., at 30. The answer here is
a resounding no.
Even if it were appropriate to delve into the significant
impairment question, the history of this very case confirms
that neither the Mortgage Brokers, Lenders, and Servicers
Licensing Act, Mich. Comp. Laws Ann. § 445.1651 et seq.
(West 2002 and Supp. 2006), nor the Secondary Mortgage
Loan Act, § 493.51 et seq. (West 2005), conflicts with “the let
ter or the general objects and purposes of Congressional leg
islation.” Davis v. Elmira Savings Bank, 161 U. S. 275, 290
(1896). Enacted to protect consumers from mortgage lend
ing abuses, the Acts require mortgage brokers, mortgage
servicers, and mortgage lenders to register with the State,
§§ 445.1652(1) (West Supp. 2006), 493.52(1) (West 2005), to
submit certain financial statements, §§ 445.1657(2) (West
2002), 493.56a(2) (West 2005), and to submit to state visitorial
oversight, §§ 445.1661 (West 2002), 493.56b (West 2005). Be
cause the Acts expressly provide that they do not apply to
“depository financial institution[s],” § 445.1675(a) (West 2002),
neither national nor state banks are covered.17 The statute
therefore covers only nonbank companies incorporated under
state law.18
17 While the Court at one point observes that “the Michigan provisions
at issue exempt national banks from coverage,” see ante, at 13, that is
because they are “banks,” not because they are “national.” See ante, at
8 (noting that “Michigan’s statutory regime exempts banks, both national
and state, from state mortgage lending regulation” (emphasis added)).
18 The Michigan laws focus on consumer protection, whereas the OCC
regulations quoted by the Court focus on protection of bank depositors.
See ante, at 12, n. 4, and 16, n. 8.

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35 Cite as: 550 U. S. 1 (2007)
Stevens, J., dissenting
Respondent Wachovia Mortgage Corporation has never
engaged in the core banking business of accepting deposits.
In 1997, when Wachovia Mortgage was first licensed to do
business in Michigan, it was owned by a holding company
that also owned the respondent Wachovia Bank, N. A. (Nei
ther the holding company nor the bank did business in Michi
gan.) There is no evidence, and no reason to believe, that
compliance with the Michigan statutes imposed any special
burdens on Wachovia Mortgage’s activities, or that the trans
fer in 2003 of its ownership from the holding company to
the bank required it to make any changes whatsoever in its
methods of doing business. Neither before nor after that
transfer was there any discernible federal interest in grant
ing the company immunity from regulations that applied
evenhandedly to its competitors. The mere fact that its ac
tivities may also be performed by its banking parent pro
vides at best a feeble justification for immunizing it from
state regulation. And it is a justification that the longstand
ing congressional “policy of competitive equality” clearly
outweighs. See Plant City, 396 U. S., at 133.
Again, however, it is beside the point whether in the
Court’s judgment the Michigan laws will hamper national
banks’ ability to carry out their banking functions through
operating subsidiaries. It is Congress’ judgment that mat
ters here, and Congress has in the NBA pre-empted only
those laws purporting to lodge with state authorities visito
rial power over national banks. 12 U. S. C. § 484(a). In my
view, the Court’s eagerness to infuse congressional silence
with pre-emptive force threatens the vitality of most state
laws as applied to national banks—a result at odds with the
long and unbroken history of dual state and federal authority
over national banks, not to mention our federal system of
government. It is especially troubling that the Court so
blithely pre-empts Michigan laws designed to protect con
sumers. Consumer protection is quintessentially a “field

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36 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
which the States have traditionally occupied,” Rice, 331
U. S., at 230; 19 the Court should therefore have been all the
more reluctant to conclude that the “clear and manifest pur
pose of Congress” was to set aside the laws of a sovereign
State, ibid.
IV
Respondents maintain that even if the NBA lacks pre
emptive force, the GLBA’s use of the phrase “same terms
and conditions” reflects a congressional intent to pre-empt
state laws as they apply to the mortgage lending activities of
operating subsidiaries. See 12 U. S. C. § 24a(g)(3). Indeed,
the Court obliquely suggests as much, salting its analysis of
the NBA with references to the GLBA. See ante, at 18,
19–20. Even a cursory review of the GLBA’s text shows
that it cannot bear the pre-emptive weight respondents (and
perhaps the Court) would assign to it.
The phrase “same terms and conditions” appears in the
definition of “financial subsidiary,” not in a provision of the
statute conferring national bank powers. Even there, it
serves only to describe what a financial subsidiary is not.
See § 24a(g)(3) (defining financial subsidiary as any subsid
iary “other than a subsidiary that . . . engages solely in activi
ties that national banks are permitted to engage in directly
and are conducted subject to the same terms and conditions
that govern the conduct of such activities by national
banks”). Apart from this slanting reference, the GLBA
never mentions operating subsidiaries. Far from a demon
stration that the “clear and manifest purpose of Congress”
was to pre-empt the type of law at issue here, Rice, 331 U. S.,
at 230, the “same terms and conditions” language at most
reflects an uncontroversial acknowledgment that operating
subsidiaries of national banks are subject to the same federal
19 See also General Motors Corp. v. Abrams, 897 F. 2d 34, 41–43 (CA2
1990) (“Because consumer protection law is a field traditionally regulated
by the states, compelling evidence of an intention to preempt is required
in this area”).

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Cite as: 550 U. S. 1 (2007) 37
Stevens, J., dissenting
oversight as their national bank parents.20 It has nothing
to do with pre-emption.
Congress in fact disavowed any such pre-emptive intent.
Section 104 of the GLBA is titled “Operation of State Law,”
113 Stat. 1352, and it devotes more than 3,000 words to ex
plaining which state laws Congress meant the GLBA to pre
empt. Leave aside the oddity of a Congress that addresses
pre-emption in exquisite detail in one provision of the GLBA
but (according to respondents) uses only four words to ex
press a pre-emptive intent elsewhere in the statute. More
importantly, § 104(d)(4) provides that “[n]o State statute . . .
shall be preempted” by the GLBA unless that statute has a
disparate impact on federally chartered depository institu
tions, “prevent[s] a depository institution or affiliate thereof
from engaging in activities authorized or permitted by this
Act,” or “conflict[s] with the intent of this Act generally to
permit affiliations that are authorized or permitted by Fed
eral law.” Id., at 1357 (emphasis added) (codified at 15
U. S. C. § 6701(d)(4)). No one claims that the Michigan laws
at issue here are discriminatory, forbid affiliations, or “pre
vent” any operating subsidiary from engaging in banking
activities. It necessarily follows that the GLBA does not
pre-empt them.
Even assuming that the phrase has something to do with
pre-emption, it is simply not the case that the nonencroach
ment of state regulation is a “term and condition” of engage
ment in the business of banking. As a historical matter,
state laws have always applied to national banks and have
often encroached on the business of banking. See National
Bank, 9 Wall., at 362 (observing that national banks “are sub
ject to the laws of the State, and are governed in their daily
course of business far more by the laws of the State than
of the nation”). The Court itself acknowledges that state
usury, contract, and property law govern the activities of
20 See 31 Fed. Reg. 11460 (noting that the OCC maintains regulatory
oversight of operating subsidiaries).

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38 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
national banks and their subsidiaries, ante, at 11–12, notwith
standing that they vary across “all States in which the banks
operate,” ante, at 13. State law has always provided the
legal backdrop against which national banks make real estate
loans, and “[t]he fact that the banking agencies maintain a
close surveillance of the industry with a view toward pre
venting unsound practices that might impair liquidity or lead
to insolvency does not make federal banking regulation all
pervasive.” United States v. Philadelphia Nat. Bank, 374
U. S. 321, 352 (1963).
V
In my view, the most pressing questions in this case are
whether Congress has delegated to the Comptroller of the
Currency the authority to pre-empt the laws of a sovereign
State as they apply to operating subsidiaries, and if so,
whether that authority was properly exercised here. See
12 CFR § 7.4006 (2006) (“State laws apply to national bank
operating subsidiaries to the same extent that those laws
apply to the parent national bank”). Without directly an
swering either question, the Court concludes that pre
emption is the “necessary consequence” of various congres
sional statutes. Ante, at 20. Because I read those statutes
differently, I must consider (as did the four Circuits to have
addressed this issue) whether an administrative agency can
assume the power to displace the duly enacted laws of a
state legislature.
To begin with, Congress knows how to authorize executive
agencies to pre-empt state laws.21 It has not done so here.
21 See, e. g., 47 U. S. C. §§ 253(a), (d) (authorizing the Federal Communica
tions Commission to pre-empt “any [state] statute, regulation, or legal
requirement” that “may prohibit or have the effect of prohibiting the abil
ity of any entity to provide any interstate or intrastate telecommunica
tions service”); 30 U. S. C. § 1254(g) (pre-empting any statute that conflicts
with “the purposes and the requirements of this chapter” and permitting
the Secretary of the Interior to “set forth any State law or regulation
which is preempted and superseded”); 49 U. S. C. § 5125(d) (authorizing the

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39 Cite as: 550 U. S. 1 (2007)
Stevens, J., dissenting
Nor does the statutory provision authorizing banks to en
gage in certain lines of business that are “incidental” to their
primary business of accepting and managing the funds of de
positors expressly or implicitly grant the OCC the power to
immunize banks or their subsidiaries from state regulation.22
See 12 U. S. C. § 24 Seventh. For there is a vast and obvious
difference between rules authorizing or regulating conduct
and rules granting immunity from regulation. The Comp
troller may well have the authority to decide whether the
activities of a mortgage broker, a real estate broker, or a
travel agent should be characterized as “incidental” to bank
ing, and to approve a bank’s entry into those businesses,
either directly or through its subsidiaries. See, e. g., Na
tionsBank of N. C., N. A. v. Variable Annuity Life Ins. Co.,
513 U. S. 251, 258 (1995) (upholding the OCC’s interpretation
of the “incidental powers” provision to permit national banks
to serve as agents in annuity sales). But that lesser power
does not imply the far greater power to immunize banks or
their subsidiaries from state laws regulating the conduct of
their competitors.23 As we said almost 40 years ago, “the
Secretary of Transportation to decide whether a state or local statute
that conflicts with the regulation of hazardous waste transportation is
pre-empted).
22 Congress did make an indirect reference to regulatory pre-emption in
the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
§ 114, 108 Stat. 2367 (codified at 12 U. S. C. § 43(a)). The Riegle-Neal Act
requires the OCC to jump through additional procedural hoops (specifi
cally, notice and comment, even for opinion letters and interpretive rules)
before “conclud[ing] that Federal law preempts the application to a na
tional bank of any State law regarding community reinvestment, consumer
protection, fair lending, or the establishment of intrastate branches.”
Ibid. By its own terms, however, this provision granted no pre-emption
authority to the OCC.
23 In a recent adoption of a separate pre-emption regulation, the OCC
located the source of its authority to displace state laws in §§ 93a and 371.
See 69 Fed. Reg. 1908 (2004). Both provisions are generic authorizations
of rulemaking authority, however, and neither says a word about pre
emption. See 12 U. S. C. § 93a (“[T]he Comptroller of the Currency is au

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40 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
congressional policy of competitive equality with its defer
ence to state standards” is not “open to modification by the
Comptroller of the Currency.” Plant City, 396 U. S., at
138.24
Were I inclined to assume (and I am not) that congres
sional silence should be read as a conferral of pre-emptive
authority, I would not find that the OCC has actually exer
cised any such authority here. When the agency promul
gated 12 CFR § 7.4006, it explained that “[t]he section itself
does not effect preemption of any State law; it reflects the
conclusion we believe a Federal court would reach, even in
the absence of the regulation . . . .” 66 Fed. Reg. 34790
(2001) (emphasis added). Taking the OCC at its word, then,
§ 7.4006 has no pre-emptive force of its own, but merely pre
dicts how a federal court’s analysis will proceed.
thorized to prescribe rules and regulations to carry out the responsibilities
of the office”); § 371(a) (authorizing national banks to make real estate
loans “subject to . . . such restrictions and requirements as the Comptroller
of the Currency may prescribe by regulation or order”). Needless to say,
they provide no textual foundation for the OCC’s assertion of pre
emption authority.
24 This conclusion does not touch our cases holding that a properly pro
mulgated agency regulation can have a pre-emptive effect should it conflict
with state law. See Hillsborough County v. Automated Medical Labora
tories, Inc., 471 U. S. 707, 713 (1985) (“We have held repeatedly that state
laws can be pre-empted by federal regulations as well as by federal stat
utes”); see also Fidelity Fed. Sav. & Loan Assn. v. De la Cuesta, 458
U. S. 141, 154–159 (1982) (holding that a regulation authorizing federal
savings-and-loan associations to include due-on-sale clauses in mortgage
contracts conflicted with a state-court doctrine that such clauses were un
enforceable); City of New York v. FCC, 486 U. S. 57, 59, 65–70 (1988) (find
ing that the FCC’s adoption of “regulations that establish technical stand
ards to govern the quality of cable television signals” pre-empted local
signal quality standards). My analysis is rather confined to agency regu
lations (like the one at issue here) that “purpor[t] to settle the scope of
federal preemption” and “reflec[t] an agency’s effort to transform the pre
emption question from a judicial inquiry into an administrative fait accom
pli.” See Note, The Unwarranted Regulatory Preemption of Predatory
Lending Laws, 79 N. Y. U. L. Rev. 2274, 2289 (2004).

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Cite as: 550 U. S. 1 (2007) 41
Stevens, J., dissenting
Even if the OCC did intend its regulation to pre-empt the
state laws at issue here, it would still not merit Chevron
deference. No case from this Court has ever applied such a
deferential standard to an agency decision that could so eas
ily disrupt the federal-state balance. To be sure, expert
agency opinions as to which state laws conflict with a federal
statute may be entitled to “some weight,” especially when
“the subject matter is technical” and “the relevant history
and background are complex and extensive.” Geier v.
American Honda Motor Co., 529 U. S. 861, 883 (2000). But
“[u]nlike Congress, administrative agencies are clearly not
designed to represent the interests of States, yet with rela
tive ease they can promulgate comprehensive and detailed
regulations that have broad pre-emption ramifications for
state law.” Id., at 908 (Stevens, J., dissenting).25 For that
reason, when an agency purports to decide the scope of fed
eral pre-emption, a healthy respect for state sovereignty
calls for something less than Chevron deference. See 529
U. S., at 911–912; see also Medtronic, 518 U. S., at 512
(O’Connor, J., concurring in part and dissenting in part) (“It
is not certain that an agency regulation determining the
pre-emptive effect of any federal statute is entitled to
deference”).
In any event, neither of the two justifications the OCC
advanced when it promulgated 12 CFR § 7.4006 withstand
Chevron analysis. First, the OCC observed that the GLBA
“expressly acknowledged the authority of national banks to
own subsidiaries” that conduct national bank activities
“ ‘subject to the same terms and conditions that govern the
conduct of such activities by national banks.’ ” 66 Fed. Reg.
34788 (quoting 12 U. S. C. § 24a(g)(3)). The agency also
noted that it had folded the “ ‘same terms and conditions’ ”
language into an implementing regulation, 66 Fed. Reg.
25 See also Mendelson, Chevron and Preemption, 102 Mich. L. Rev. 737,
779–790 (2003–2004) (arguing that agencies are generally insensitive to
federalism concerns).

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42 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
34788 (citing 12 CFR § 5.34(e)(3) (2001)). According to the
OCC, “[a] fundamental component of these descriptions of
the characteristics of operating subsidiaries in GLBA and
the OCC’s rule is that state laws apply to operating subsidi
aries to the same extent as they apply to the parent national
bank.” 66 Fed. Reg. 34788.
This is incorrect. As explained above, the GLBA’s off
hand use of the “same terms and conditions” language says
nothing about pre-emption. See supra, at 36–38. Nor can
the OCC’s incorporation of that language into a regulation
support the agency’s position: “Simply put, the existence of
a parroting regulation does not change the fact that the
question here is not the meaning of the regulation but the
meaning of the statute.” Gonzales v. Oregon, 546 U. S. 243,
257 (2006). The OCC’s argument to the contrary is particu
larly surprising given that when it promulgated its “same
terms and conditions” regulation, it said not one word about
pre-emption or the federalism implications of its rule—an
inexplicable elision if a “fundamental component” of the
phrase is the need to operate unfettered by state oversight.
Compare 65 Fed. Reg. 12905–12910 (2000) with Exec. Order
No. 13132, §§ 2, 4, 64 Fed. Reg. 43255, 43257 (1999) (requiring
agencies to explicitly consider the “federalism implications”
of their chosen policies and to hesitate before pre-empting
state laws).
Second, the OCC describes operating subsidiaries “as the
equivalent of departments or divisions of their parent
banks,” 66 Fed. Reg. 34788, which, through the operation of
12 U. S. C. § 484(a), would not be subject to state visitorial
powers. The OCC claims that national banks might desire
to conduct their business through operating subsidiaries for
the purposes of “controlling operations costs, improving ef
fectiveness of supervision, more accurate determination of
profits, decentralizing management decisions [and] separat
ing particular operations of the bank from other operations.”
Brief for United States as Amicus Curiae 19 (quoting 31

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43 Cite as: 550 U. S. 1 (2007)
Stevens, J., dissenting
Fed. Reg. 11460). It is obvious, however, that a national
bank could realize all of those benefits through the straight
forward expedient of dissolving the corporation and making
it in fact a “department” or a “division” of the parent bank.
Rather, the primary advantage of maintaining an operat
ing subsidiary as a separate corporation is that it shields the
national bank from the operating subsidiaries’ liabilities.
United States v. Bestfoods, 524 U. S. 51, 61 (1998) (“It is a
general principle of corporate law deeply ingrained in our
economic and legal systems that a parent corporation . . . is
not liable for the acts of its subsidiary” (internal quotation
marks omitted)). For that reason, the OCC’s regulation is
about far more than mere “corporate structure,” ante, at 18,
or “internal governance,” ante, at 21, 19 (citing Wells Fargo
Bank N. A. v. Boutris, 419 F. 3d 949, 960 (CA9 2005)); see
also Dole Food Co. v. Patrickson, 538 U. S. 468, 474 (2003)
(“In issues of corporate law structure often matters”). It is
about whether a state corporation can avoid complying with
state regulations, yet nevertheless take advantage of state
laws insulating its owners from liability. The federal inter
est in protecting depositors in national banks from their sub
sidiaries’ liabilities surely does not justify a grant of immu
nity from laws that apply to competitors. Indeed, the OCC’s
regulation may drive companies seeking refuge from state
regulation into the arms of federal parents, harm those state
competitors who are not lucky enough to find a federal bene
factor, and hamstring States’ ability to regulate the affairs
of state corporations. As a result, the OCC’s regulation
threatens both the dual banking system and the principle of
competitive equality that is its cornerstone.
VI
The novelty of today’s holding merits a final comment.
Whatever the Court says, this is a case about an administra
tive agency’s power to pre-empt state laws. I agree with
the Court that the Tenth Amendment does not preclude the

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44 WATTERS v. WACHOVIA BANK, N. A.
Stevens, J., dissenting
exercise of that power. But the fact that that Amendment
was included in the Bill of Rights should nevertheless remind
the Court that its ruling affects the allocation of powers
among sovereigns. Indeed, the reasons for adopting that
Amendment are precisely those that undergird the well
established presumption against pre-emption.
With rare exception, we have found pre-emption only
when a federal statute commanded it, see Cipollone, 505
U. S., at 517, when a conflict between federal and state law
precluded obedience to both sovereigns, see Florida Lime &
Avocado Growers, Inc. v. Paul, 373 U. S. 132, 142–143 (1963),
or when a federal statute so completely occupied a field that
it left no room for additional state regulation, see Napier v.
Atlantic Coast Line R. Co., 272 U. S. 605, 613 (1926). Al
most invariably the finding of pre-emption has been based
on this Court’s interpretation of statutory language or of
regulations plainly authorized by Congress. Never before
have we endorsed administrative action whose sole purpose
was to pre-empt state law rather than to implement a statu
tory command.
Accordingly, I respectfully dissent.