ON PETITION FOR REVIEW FROM DECISION OF BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Before Adams, Van Dusen and Sloviter, Circuit Judges.
This matter comes before us as a petition for review of a cease and desist order of the Board of Governors of the Federal Reserve System (the "Board"). The Board found petitioner, Wilshire Oil Company of Texas ("Wilshire"), to be in violation of the Bank Holding Company Act of 1956, as amended, 12 U.S.C. §§ 1841-1850 (1976) (the "BHC Act"). The only contested issue is whether Wilshire's subsidiary, the Trust Company of New Jersey ("TCNJ"), is a "bank" under the BHC Act. Wilshire concedes that if TCNJ is a "bank," then Wilshire is a "bank holding company" engaged in both banking and non-banking activities in violation of § 4(a)(2) of the Act, 12 U.S.C. § 1843(a)(2). We affirm the Board's conclusion that TCNJ is a "bank" under the BHC Act, and deny the Petition for Review seeking to terminate the cease and desist order against Wilshire.
The Bank Holding Company Act, 12 U.S.C. §§ 1841-1850 (1976), was enacted to prevent the concentration of commercial banking activities and to separate banking from commerce.*fn1 Section 4 of the BHC Act generally restricts the non-banking activities of "bank holding companies," defined in § 2(a)(1) as companies which have "control over any bank." As originally enacted, the BHC Act restricted the non-banking activities of only companies that controlled more than one bank, but in 1970 Congress amended the Act so as to apply also to one-bank holding companies. Under § 4(a)(2), these one-bank holding companies were given 10 years, until December 31, 1980, either to divest their non-banking operations or to cease being bank holding companies. 12 U.S.C. § 1843(a)(2) (1976).
Congress has twice modified the definition of "bank" under the BHC Act. The original definition included all national banks, state banks, and savings banks. Act of May 9, 1956, c. 240, § 2(c), 70 Stat. 133. In 1966, the definition was narrowed to encompass only those domestic institutions which "(accept) deposits that the depositor has a legal right to withdraw on demand." Act of July 1, 1966, Pub.L. 89-485, § 3, 80 Stat. 236, 237. The current definition was enacted in 1970:
"(c) "Bank' means any institution ... which (1) accepts deposits that the depositor has a legal right to withdraw on demand, and (2) engages in the business of making commercial loans."
12 U.S.C. § 1841(c) (1976).
The Board of Governors of the Federal Reserve System is charged with the administration of the BHC Act, and § 5(b) authorizes the Board "to issue such regulations and orders as may be necessary to enable it to administer and carry out the purposes of this chapter and prevent evasions thereof." 12 U.S.C. § 1844(b) (1976). Under §§ 8(b)(1) & (3) of the Financial Institutions Supervisory Act of 1966 ("FISA"), 12 U.S.C. §§ 1818(b)(1) & (3) (Supp.1980), the Board also has the power to institute cease and desist proceedings whenever it has reason to believe that the BHC Act is about to be violated.
Wilshire Oil Company of Texas, the petitioner here, is engaged in the production of oil and natural gas, both directly and through its subsidiaries. Until November 1980, Trust Company of New Jersey, one of Wilshire's subsidiaries,*fn2 was concededly a "bank" under the BHC Act's current definition; TCNJ "(1) accept(ed) deposits that the depositor (had) a legal right to withdraw on demand, and (2) engage(d) in the business of making commercial loans." 12 U.S.C. § 1841(c) (1976).*fn3 Because Wilshire controlled a "bank," it was a bank holding company required by § 4(a)(2) either to divest its oil and gas business or to cease being a bank holding company before December 31, 1980.
Beginning in 1977, the Board frequently urged Wilshire to decide how it would come into compliance with the BHC Act before the December 31, 1980, deadline. Wilshire suggested several possible ways of complying with the Act, but made no firm proposal until November 1980. On November 3, 1980, less than two months before the final deadline, Wilshire notified the Board that it intended to keep both its oil and gas business and its interest in TCNJ. Wilshire announced that it would comply with the BHC Act by changing TCNJ into a "nonbank" under the Act.
On November 5, 1980, TCNJ sent a notice to its depositors that:
"The Trust Company of New Jersey, beginning November 20, 1980 reserves the right to require 14 days notice prior to withdrawal from its transactional accounts. The Trust Company has never exercised its right to require notice and has no intention of exercising a notice provision on any type of account."
(App. 294). TCNJ also modified its account agreement forms for its newly-named "transactional accounts" to include this reservation of the right to require notice for withdrawal. Except for this reservation, TCNJ has not changed any of its banking operations, and the reservation has had no practical effect on the ...