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U.S. Supreme Court

Northeast Bancorp, Inc. v. Governors, FRS, 472 U.S. 159 (1985)

Northeast Bancorp, Inc. v. Board of Governors

of the Federal Reserve System

No. 84-363

Argued April 15, 1985

Decided June 10, 1985

472 U.S. 159


The Bank Holding Company Act of 1956 (BHCA) requires a bank holding company to obtain the approval of the Federal Reserve Board (Board) before it may acquire a bank. Section 3(d) of the Act (known as the Douglas Amendment) prohibits the Board from approving an application of a bank holding company located in one State to acquire a bank located in another State unless the acquisition

"is specifically authorized by the statute laws of the State in which such bank is located, by language to that effect and not merely by implication."

Substantially similar Connecticut and Massachusetts statutes provide that an out-of-state bank holding company with its principal place of business in one of the other New England States may acquire an in-state bank, provided that the other State accords equivalent reciprocal privileges to the enacting State's banking organizations. Certain bank holding companies (respondents here) applied to the Board as out-of-state companies for purposes of either the Connecticut or Massachusetts statute, seeking approval for acquisitions of banks located in one or the other of those States. Petitioners, prospective competitors, opposed the proposed acquisitions in proceedings before the Board, contending that the acquisitions were not authorized by the Douglas Amendment and that, if they were, the applicable Connecticut or Massachusetts statute, by discriminating against non-New England out-of-state bank holding companies, violated the Commerce, Compact, and Equal Protection Clauses of the Federal Constitution. Rejecting petitioners' contentions, the Board approved the applications, and the Court of Appeals, in consolidated review proceedings, affirmed.


1. The Connecticut and Massachusetts statutes are of the kind contemplated by the Douglas Amendment to lift its ban on interstate acquisitions. The Amendment's language plainly permits States to lift the federal ban entirely, and although it does not specifically indicate that a State may partially lift the ban, neither does it specifically indicate that a State is allowed only the alternatives of leaving the federal ban in place or lifting it completely. The Amendment's legislative history indicates

Page 472 U. S. 160

that Congress intended to allow each State flexibility in its approach, contemplating that some States might partially lift the ban on interstate banking without opening themselves up to interstate banking from everywhere in the Nation. Moreover, the Connecticut and Massachusetts statutes, by allowing only regional acquisitions, are consistent with the Amendment's and the BHCA's purpose of retaining local, community-based control over banking. Pp. 472 U. S. 168-173.

2. The Connecticut and Massachusetts statutes do not violate the Commerce Clause. Congress' commerce power is not dormant here, but has been exercised by enactment of the BHCA and the Douglas Amendment, authorizing the challenged state statutes. State actions that Congress plainly authorizes are invulnerable to constitutional attack under the Commerce Clause. Pp. 472 U. S. 174-175.

3. The challenged state statutes do not violate the Compact Clause, which provides that no State, without Congress' consent, shall enter into an agreement or compact with another State. Even assuming, arguendo, that the state statutes (along with statutes of other New England States under petitioners' theory) constitute an agreement or compact,

"application of the Compact Clause is limited to agreements that are"

"directed to the formation of any combination tending to the increase of political power in the States, which may encroach upon or interfere with the just supremacy of the United States."

New Hampshire v. Maine, 426 U. S. 363, 426 U. S. 369, quoting Virginia v. Tennessee, 148 U. S. 503, 148 U. S. 519. In view of the Douglas Amendment, the challenged state statutes, which comply with the BHCA, cannot possibly infringe federal supremacy. Nor do the state statutes in question either enhance the political power of the New England States at the expense of other States or have an impact on the federal structure. Pp. 472 U. S. 175-176.

4. The Connecticut and Massachusetts statutes do not violate the Equal Protection Clause. The statutes favor out-of-state corporations within the New England region over corporations from other parts of the country. However, Connecticut and Massachusetts, in enacting their statutes, considered that interstate banking on a regional basis combined the beneficial effect of increasing the number of banking competitors with the need to preserve a close relationship between those in the community who need credit and those who provide credit, and that acquisition of in-state banks by holding companies headquartered outside the New England region would threaten the independence of local banking institutions. These concerns meet the traditional rational basis for judging equal protection claims. Metropolitan Life Ins. Co. v. Ward, 470 U. S. 869, distinguished. Pp. 472 U. S. 176-178.

740 F.2d 203, affirmed.

Page 472 U. S. 161

REHNQUIST, J., delivered the opinion of the Court, in which all other Members joined except POWELL, J., who took no part in the decision of the case. O'CONNOR, J., filed a concurring opinion, post, p. 472 U. S. 178.

Page 472 U. S. 162

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