Board of Governors of Federal Reserve System v. First Lincolnwood Corporation

PETITIONER: Board of Governors of Federal Reserve System
RESPONDENT: First Lincolnwood Corporation
LOCATION: Collision between Mr. Montrym’s car and motorcycle

DOCKET NO.: 77-832
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 439 US 234 (1978)
ARGUED: Oct 11, 1978
DECIDED: Dec 11, 1978

ADVOCATES:
George B. Collins - for respondent
Stephen M. Shapiro - for petitioner

Facts of the case

Question

Media for Board of Governors of Federal Reserve System v. First Lincolnwood Corporation

Audio Transcription for Oral Argument - October 11, 1978 in Board of Governors of Federal Reserve System v. First Lincolnwood Corporation

Audio Transcription for Opinion Announcement - December 11, 1978 in Board of Governors of Federal Reserve System v. First Lincolnwood Corporation

Warren E. Burger:

The judgment and opinion of the Court in Board of Governors of Federal Reserve System against First Lincolnwood Corporation will be announced by Mr. Justice Marshall.

Thurgood Marshall:

This case is here on writ of certiorari to the Court of Appeals for the Seventh Circuit.

The issue is whether the Bank Holding Company Act of 1956 allows the Federal Reserve Board to deny approval of certain transactions that would not weaken the financial condition of a holding company or a subsidiary bank but would produce a financially unsound bank holding company.

The First Lincolnwood Corporation was organized to serve as a bank holding company.

The organizers proposed to exchange the shares of the company for their shares of the First National Bank of Lincolnwood and to have the holding company assume a debt they had previously incurred.

The purpose of this reorganization was to enable the holding company and the bank to realize substantial tax savings.

The Board disapproved the proposed transaction finding that the holding company and the bank did not meet its standards of financial soundness.

The Court of Appeals for the Seventh Circuit reversed in an en banc decision.

The Court held that although the Board could approve its base, its decision solely on financial factors, it must approve a transaction that did not compound the acquired bank financial difficulties.

By an opinion filed today with the clerk, we hold that the Board's actions were within its statutory authority.

Both the language and the legislative history of the statute support the Board's interpretation of the Bank Holding Company Act as an authorization to deny application solely on grounds of financial soundness or unsoundness.

Further, nothing in the language of the legislative history of this Act requires a Board to approve transactions merely because they would not weaken a subsidiary bank's financial condition.

The Board's exercise of its authority to prevent the formation of financially unsound bank holding company has had significant and beneficial effects on the banking system.

The effects of which Congress has been appraised and although Congress has amended the statute, it has not sought to curtail the Board's authority.

We see no basis for this Court to act where Congress has not.

Mr. Justice Stevens has filed a dissenting opinion in which Mr. Justice Rehnquist joins.

Warren E. Burger:

Thank you Mr. Justice Marshall.