Federal Corporate Law and the Business of Banking

Abstract

The only profit-seeking business enterprises chartered by a federal government agency are banks. Yet, there is barely any scholarship justifying this exception to state primacy in American corporate law.

This Article addresses that gap. It reinterprets the National Bank Act (NBA)—the organic statute governing national banks, the heavyweights of the financial sector—as a corporation law and recovers the reasons why Congress wrote this law: not to catalyze private wealth creation or to regulate an existing industry, but to solve an economic governance problem. National banks are federal instrumentalities charged with augmenting the money supply—a delegated sovereign privilege. Congress recruited private shareholders and managers to run these instrumentalities as a check on monetary overissue and to prevent politicized asset allocation by government officials—a form of premodern agency independence.

Viewing the NBA as a corporation law yields surprising dividends. First, it exposes a major flaw at the heart of U.S. banking jurisprudence. In recent decades, the Supreme Court and the Office of the Comptroller of the Currency (OCC), the chartering authority for national banks, have interpreted national banks’ corporate powers expansively, allowing them to enter a vast range of new business lines. But the corporate powers provision of the NBA is not a “regulatory” statute to which courts should apply Chevron deference, nor is it part of the OCC’s enabling act. It is part of the corporate charters of national banks. Accordingly, the opposite, settled rule of construction applies; ambiguity is construed strictly against the corporation. Second, it reveals that the OCC’s current campaign to unhitch national bank charters from the deposit business lacks a statutory basis and threatens an unprecedented colonization of American enterprise law by a federal government agency that is ill-suited to this mission and was never congressionally tasked with it.

Keywords: corporate law, money, banking, financial regulation, fintech

JEL Classification: K22, K23