FRANKLIN NATIONAL BANK OF FRANKLIN SQUARE v. NEW YORK
No. 427
Supreme Court of the United States
Argued March 9-10, 1954. Decided April 5, 1954.
347 U.S. 373
By special leave of Court, Solicitor General Sobeloff argued the cause for the United States, as amicus curiae, urging reversal. With him on the brief were Assistant Attorney General Burger, Marvin E. Frankel and Melvin Richter.
Daniel M. Cohen, Assistant Attorney General of New York, argued the cause for appellee. With him on the brief were Nathaniel L. Goldstein, Attorney General, and Wendell P. Brown, Solicitor General.
Peter Keber filed a brief for the New York State Bankers Association, as amicus curiae, urging reversal.
Fred N. Oliver and Michael F. McCarthy filed a brief for the Savings Banks Association of the State of New York, as amicus curiae, supporting appellee.
Oрinion of the Court by MR. JUSTICE JACKSON, announced by MR. JUSTICE FRANKFURTER.
This appeal from the Court of Appeals of New York presents the narrow question whether federal statutes which authorize national banks to receive savings deposits conflict with New York lеgislation which prohibits them from using the word “saving” or “savings” in their advertising or business. We think the federal and state statutes are incompatible, and in such circumstances the policy of the State must yield.
It is the policy of New York to charter аnd foster the mutual savings bank, a nonprofit institution whose earnings inure to the benefit of depositors rather than to stockholders. These institutions have a long history as relatively stable and safe depositaries for the accumulatiоns of thrifty New Yorkers and as a source of credit for limited uses. They have grown to be an important part of New York‘s banking and economic structure. That State also charters the savings and loan association, an institution of а different type, intended to serve somewhat similar ends. The Legislature was concerned lest commercial banks, in seeking to induce deposits of the same character, so use the word “savings” as to lead uninformed and indiscriminating persons to believe that they were dealing with the chartered savings institutions. Hence, by its Banking Law, New York has forbidden use of the word “savings,” or its variants, by any banks other than its own chartered savings banks and savings and loan associations.1
However, the Federal Government is a rival chartering authority for banks. Since McCulloch v. Maryland, 4 Wheat. 316, it has not been open to question that the Federal Government may constitutionally create and govern such institutions within the states. The United States has set up a system of national banks as federal instrumentalities to perform various functions such as providing circulating medium and government credit, as well as financing commerce and acting as private depositaries. Some of their funсtions, especially as a source for federal credit, depend upon their success in attracting private deposits. That these federal institutions may be at no disadvantage in competition with state-created institutiоns, the Federal Government has frequently expanded their functions and authority. Of such nature are the measures now before us.
The Federal Reserve Act provides that a national bank “may continue hereafter as heretofore to receive time and savings deposits and to pay interest on the same, but the rate of interest which such association may pay upon such time deposits or upon savings or other deposits shall not exceеd the maximum rate authorized by law to be paid upon such deposits by State banks or trust com-
Appellant, believing it was authorized by the Federal Government to do so, used the word “saving” and “savings” in advertising, in signs displayed in the bank, on its deposit and withdrawal slips, and in its annual reports. It is beyond question that appellant violated the State‘s prohibition if it is a valid one.
Thе Attorney General of the State initiated this case by a complaint alleging such violations, seeking a broad injunction. The trial accumulated a large record devoted mainly to the merits and demerits of the New York legislation and its consequences upon banks and depositors. The trial court found no purposeful deception of the public. It held that the advertising and other use of the forbidden terms were in pursuit of implied and incidental powers conferred upon national banks by the
We are unable to support the contention that the authorization for national banks to receive savings deposits is limited or qualified because of the expression that they may “continue hereafter as heretofore” to do so. It appears that previous to the enactment, acceptance of such accounts by national banks had been usual but was nоt expressly authorized. We do not think the Federal Reserve Act should be construed to freeze individual banks or those located within any state to the customs and practices preceding the statute. We read the Act as declaratory of the right of a national bank to enter into or remain in that type of business. That has been the administrative construction, and we think it is correct.
Nor can we construe the two Federal Acts as permitting only a passive acceptance of deposits thrust upon them. Modern competition for business finds advertising one of the most usual and useful of weapons. We cannot believe that the incidental powers granted to national banks should be construed so narrowly as to preclude the use of advertising in any branch of their authorized business. It would require some affirmative indication to justify an interpretation that would permit a national
Appellee does not object to national banks taking savings deposits or even to their advertising that fact so long as they do not use the word “savings.” It takes the position that this word is a misnomеr in New York because depositors there, as a result of the state statute, have come to think of savings accounts as something entirely different from those to which the Federal Act is referring. Regardless of whether New Yorkers are really misled by the description, the fact is that Congress has given a particular label to this type of account. Whatever peculiar meaning the word may have in New York, it is a word which aptly describes, in a national sense, the type of business carried on by these national banks. They do accept and pay interest on time deposits of people‘s savings, and they must be deemed to have the right to advertise that fact by using the commonly understood description which Congress has specifically selected. We find no indication that Congress intended to make this phase of national banking subject to local restrictions, as it has done by express language in several оther instances.7
There appears to be a clear conflict between the law of New York and the law of the Federal Government. We cannot resolve conflicts of authority by our judgment as to the wisdom or need оf either conflicting policy. The
The judgment of the New York Court of Appeals is reversed and the case is remanded for further proceedings not inconsistent with this opinion.
Reversed and remanded.
MR. JUSTICE REED, dissenting.
I dissent. It should be noted that thе New York statute, note 1 of the Court‘s opinion, limits the use of the words “saving” or “savings” in relation to their banking business to certain types of New York financial institutions. These are those that are mutual in character as distinguished from stockholder-owned. Such mutual institutions can and do pay larger returns on deposits in New York than the commercial stock-type banks, state or national, both of which are barred by the New York statute from using the word “savings” “in relation to banking or finanсial business.” The mutual banks have been successful in attracting a large proportion of savings deposits for over a century. They have a remarkable record for soundness in finance and profitable operation for the benefit of the depositors. The purpose of the New York law is to reserve the use of the word “savings” to identify the mutual type of bank operation for the public, just as the federal banking laws reserve the name “national” for a certain type of bank organized under federal law.
The Court‘s opinion permits the national banks to trade upon the good name of the savings banks to secure de-