This case presents several difficult questions concerning the proper interpretation and application of the grandfather proviso that appears within section 4(a)(2) of the Bank Holding Company Act, as amended (hereinafter "the Act"), now codified as 12 U.S.C. § 1843(a)(2) (1970). Section 4(a)(2) was enacted as a part of the Bank Holding Company Act Amendments of 1970 (hereinafter "the 1970 Amendments"), Pub.L.No.91-607, 84 Stat. 1760.
Patagonia Corporation, the petitioner, is an Arizona based, one-bank holding company which on June 30, 1968, the date on which section 1843(a)(2)
Ruling that Patagonia's grandfather rights do not extend to the 79+ percent of Pima's stock that the holding company acquired after June 30, 1968, the Board of Governors of the Federal Reserve System (hereinafter "the Board") has ordered Patagonia to divest that amount of Pima's stock before December 31, 1980. 38 Fed.Reg. 18411, 59 Fed.Res. Bull. 539 (1973).
I. Statutory Background
For reasons that have been fully discussed elsewhere,
Within section 1843(a)(2), however, Congress inserted a grandfather proviso for the purpose of creating a conditional exemption from the ban against nonbanking activities for one-bank holding
12 U.S.C. § 1843(a)(2) (1970). Subject to two limitations, which are discussed below, the grandfather clause authorizes an eligible one-bank company to continue to engage in those non-banking activities in which it lawfully was engaged, either directly or through a subsidiary, on June 30, 1968, and in which it has continuously remained so engaged since that date.
The Congressional committees that drafted the 1970 Amendments noted two reasons for the Congressional decision to grandfather the on-going activities of eligible one-bank holding companies. First, the committee reports reveal that Congress was principally concerned that the one-bank holding company device might be employed to effect serious anticompetitive abuses in the future. Both the House and Senate committees agreed that they had seen little or no evidence that the one-bank holding companies that existed in 1970 had already engaged in serious anti-competitive practices. H.R.Rep.No.1747, 91st Cong., 2d Sess. 24 (1970) (1970 U.S.Code Cong. & Admin. News, pp. 5561, 5574-75) (conference report); S.Rep.No.1084, 91st Cong., 2d Sess. 4, 5 (1970) (1970 U.S.Code Cong. & Admin.News, pp. 5519, 5522, 5523). See Cameron Financial Corp. v. Board of Governors of the Federal Reserve System, 497 F.2d 841, 846-47 (4th Cir. 1974). Second, Congress noted that some one-bank holding companies, principally those in smaller cities, had existed for long periods of time and had provided services and opportunities for local communities that otherwise might not have been available. H.R.Rep.No.1747, supra at 23-24 (1970 U.S.Code Cong. & Admin. News at pp. 5574-75).
Congress was aware, however, that even the grandfathered activities of existing one-bank holding companies might, in the future, be conducted in ways that could frustrate the principal purposes of the Act. Accordingly, Congress attached two limitations to the section 1843(a)(2) grandfather proviso. First, a one-bank holding company may not expand its grandfathered activities through the acquisition of an interest in a "going concern" that also is engaged in the grandfathered business. Second, the statute empowers the Board to terminate a holding company's grandfathered activities if the Board finds, after notice and opportunity for a hearing, that such termination is necessary "to prevent undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices." 12 U.S.C. § 1843(a)(2) (1970). The Board may institute proceedings at any time to determine whether a holding company's grandfathered activities should be terminated; however, the statute specifically required the Board to initiate such proceedings by the end of 1972 for the grandfathered activities of each one-bank holding company that on December
II. Proceedings Before the Board
Before the Board, Patagonia strongly urged that the section 1843(a)(2) grandfather proviso entitles it to retain its full, 100 percent, ownership of Pima. Patagonia's argument was predicated on its claim that on June 30, 1968, it had the power to exercise a controlling influence over the management and policies of Pima, even though it owned only 20.005 percent of Pima's stock. Therefore, Patagonia argued, Pima was its subsidiary on June 30, 1968, as the word, "subsidiary," is defined in 12 U.S.C. § 1841(d)(3) (1970). Section 1841(d)(3), also added to the Act by the 1970 Amendments, defines a bank holding company subsidiary as
Section 1843(a)(2) grandfathers those non-banking activities in which eligible one-bank holding companies were engaged, either directly or through a subsidiary, on June 30, 1968. Patagonia asserted, consequently, that on the crucial date, it was engaged, through its subsidiary, Pima, in the business of operating a savings and loan institution. Patagonia concluded, therefore, that its savings and loan activities are grandfathered and that it was not barred by the Act from acquiring Pima's remaining outstanding stock.
Patagonia first apprised the Board of its claim to grandfather rights for its full ownership of Pima in an April, 1972, response to a Board inquiry about the holding company's ongoing grandfathered activities. Shortly thereafter, on July 3, 1972, and following informal consultations with the Board's staff, Patagonia filed with the Board a document styled as an application for a Board determination, pursuant to section 1841(d)(3), that on June 30, 1968, Patagonia had power to exercise a controlling influence over Pima. Patagonia's application provided information that as of the critical date, Patagonia owned 20.005 percent of Pima's capital stock and that Patagonia had placed three representatives on Pima's fifteen-member board of directors. The application further stated that as of June 30, 1968, Patagonia had already announced its intention to acquire additional Pima stock. Finally, Patagonia attached six affidavits to its application, three from the Patagonia members of Pima's board of directors and three from Pima directors whom Patagonia did not directly control. Each affiant stated his view as to the strength of Patagonia's influence over Pima's affairs. Patagonia noted in its application that it believed that it was entitled to a hearing on the controlling influence question but stated that such a hearing would be sought only if the Board's staff
On December 31, 1970, when the 1970 Amendments became effective, the bank that Patagonia owned, the Great Western Bank and Trust Company of Phoenix, held assets in excess of $60 million. Consequently, on October 19, 1972, the Board published a notice that as required by section 1843(a)(2), it was undertaking a review of Patagonia's grandfathered activities to determine whether those activities should be terminated. 37 Fed. Reg. 22414, 22415 (1972).
After completing its review of Patagonia's grandfathered activities, the Board issued the Order that is currently before us, the Order requiring Patagonia to divest itself of all Pima stock that it acquired after June 30, 1968. The Board's Order permits Patagonia to retain the 20.005 percent interest in Pima that it owned on June 30, 1968.
The Board's Order made no mention of Patagonia's July 3, 1972, application for a Board determination that on the critical date, Patagonia had the power to exercise a controlling influence over Pima. One week later, however, on July 6, 1973, in a letter signed by the Board's Secretary, and reproduced in full at CCH Fed.Banking L.Rep. ¶ 96,005 (1973), the Board informed Patagonia that it had denied the holding company's application for a controlling influence determination. The letter stated that
The letter continued by explaining that the legislative history of section 1841(d)(3) revealed that the section was added to the Act at the suggestion of the Board and other regulatory agencies for the sole purpose of enabling the Board to identify and regulate, or order divestiture of, companies that are bank holding company subsidiaries in practical effect, even though the parent-subsidiary relationship involved did not meet the previously-established, objective definitions of "subsidiary." Those definitions
Finally, however, the Secretary wrote that even though the Board was not required to make the controlling influence determination that Patagonia had requested, the Board had carefully examined Patagonia's application and had concluded, on the basis of the evidence that Patagonia had submitted, that the holding company did not have the power, on June 30, 1968, to exercise a controlling influence over the management or affairs of Pima.
III. The Definition of "Subsidiary"
The Board's Order of June 29, 1973, states no reasons for the Board's ruling that Patagonia must divest the portion of its Pima stock that it acquired after June 30, 1968. Nevertheless, the Board Secretary's July 6, 1973, letter makes clear the Board's view that Congress did not intend that the section 1841(d)(3) definition of "subsidiary" should apply for the purpose of establishing section 1843(a)(2) grandfather rights. Patagonia vigorously disputes the Board's interpretation of the statute.
We note, initially, that the Board's interpretation of section 1841(d)(3) seems quite inconsistent with the statute's self-evident meaning. Section 1841(d), which defines "subsidiary," appears in the definitions section of the Act. Furthermore, the section deals specifically with the question that Patagonia has presented, i. e., under what conditions will a company be considered, for the various purposes of the Act, to be a subsidiary of an already-identified bank holding company. The section establishes three tests for identifying the holding company-subsidiary relationship. A company becomes a bank holding company's subsidiary if (1) the holding company controls 25 percent of the voting shares of the company's stock, (2) the holding company controls the election of a majority of the company's directors, or (3) the Board determines, after notice and opportunity for a hearing, that the holding company "has the power, directly or indirectly, to exercise a controlling influence" over the company's management or policies.
Nothing in the statute indicates that Congress intended to give the word "subsidiary," as it is used in the grandfather clause, a narrower definition than that established in the definitions portion of the Act. In the absence of such an indication, the logical assumption is that by defining "subsidiary" in section 1841(d), Congress intended that definition to apply to "subsidiary" wherever "subsidiary" appears in the Act.
The Board argues, however, that the legislative history of the 1970 Amendments requires a different conclusion. In the Board's view, the legislative history reveals that Congress added section 1841(d)(3) to the Act solely to enable the Board to expand its regulatory jurisdiction over companies that are bank holding company subsidiaries in substance, although not in previously recognized form.
As to the controlling influence definition of "subsidiary," section 1841(d)(3), the committee reports state only that the section was added ". . to conform [the then-existing definition of "subsidiary"] with the changes made with respect to the definition of a bank holding company." S.Rep.No.91-1084, supra at 24 (1970 U.S.Code Cong. & Admin.News at p. 5541). After analyzing section 1841(d)(3) in the light of its relationship to the controlling influence test in section 1841(a)(2)(C), however, we have no doubt that the Board is correct in asserting that Congress intended, by enacting the section, to expand the Board's authority to identify and regulate bank holding company subsidiaries.
Nevertheless, the legislative history does not prove that Congress intended that the section 1841(d)(3) definition of "subsidiary" should be applied only for the purpose of expanding the Board's jurisdiction. The legislative history contains no indication whatsoever that Congress intended that the controlling influence definition of "subsidiary" should not apply for the purpose of establishing grandfather rights. That question simply is not addressed. From proof in the legislative history that Congress intended one result, the Board seeks to infer that Congress intended not to reach a second result that also is consistent with the statutory language. The inference drawn by the Board fails logically to follow. Cf. Maun v. United States, 347 F.2d 970, 976 (9th Cir. 1965). It is possible that Congress never considered whether the new definition of "subsidiary" should apply for the purpose of establishing grandfather rights, but that fact, standing alone, could not justify a departure from the plain import of the statutory language, See Eastern Air Lines, Inc. v. Civil Aeronautics Board, 122 U.S.App.D.C. 375, 354 F.2d 507, 511 (1965).
Also in support of its restricted view of the meaning of "subsidiary" in the grandfather proviso, the Board relies upon the familiar rule that grandfather provisos, along with other, similar clauses that operate in derogation of a statute's dominant purpose, should be narrowly construed. See, e. g., Crescent Express Lines v. United States, 320 U.S. 401, 409, 64 S.Ct. 167, 88 L.Ed. 127 (1943). Canons of statutory construction, are, however, no more than aids to assist in ascertaining legislative intent. See, e. g., National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U.S. 453, 458, 94 S.Ct. 690, 38 L.Ed.2d 646 (1974). And we are unwilling to apply the canon that the Board has suggested for the purpose of restricting the meaning of a word that
Moreover, the legislative history reveals that after careful consideration and the rejection of several alternative plans, Congress chose to give the section 1843(a)(2) grandfather proviso a rather broad sweep. Congress sought, through the proviso, to allow eligible one-bank holding companies ". . . to continue to engage in the activities and retain the subsidiaries they held . . ., rather than requiring them to cease the activity or divest the subsidiary." S.Rep. No.91-1084, 91st Cong., 2d Sess. 4 (1970) (1970 U.S.Code Cong. & Admin.News, pp. 5519, 5523). There is no reason to believe that Congress, which had contemporaneously recognized that a bank holding company could create a subsidiary by acquiring the power to exercise a controlling influence over a company' management or policies, intended to treat controlling influence subsidiaries any differently from those subsidiaries recognized pursuant to sections 1841(d)(1) and (d)(2).
Further, there is no basis for any assumption that grandfather rights established pursuant to the controlling influence test will lead to anti-competitive abuses capable of frustrating the objectives of the Act. Congress clearly recognized that grandfather rights, regardless of how they are established, might lead to future abuses, and Congress provided an appropriate safeguard against such eventualities in the Board's power to terminate grandfather rights, regardless of how established, "to prevent undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices." 12 U.S.C. § 1843(a)(2) (1970).
We recognize that courts must accord great weight to the interpretations given a statute by the agency charged with the statute's administration. This is particularly true when, as here, the statute is relatively new and the agency's officers played an important role in the statute's drafting and consideration. Zuber v. Allen, 396 U.S. 168, 192-93, 90 S.Ct. 314, 24 L.Ed.2d 345 (1969); Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965). Nevertheless, an agency's interpretation, not always infallible, cannot be controlling, and the courts must remain as the final authorities on critical questions of statutory construction. Volkswagenwerk Aktiengesellschaft v. Federal Maritime Commission, 390 U.S. 261, 272, 88 S.Ct. 929, 19 L.Ed.2d 1090 (1968); see First National Bank in Billings v. First Bank Stock Corp., 306 F.2d 937, 941 (9th Cir. 1962). There is no requirement that the courts must defer to an administrative interpretation when there are compelling indications that the administrative interpretation is wrong. Espinoza v. Farah Manufacturing Co., Inc., 414 U.S. 86, 94-95, 94 S.Ct. 334, 38 L.Ed.2d 287 (1973). After the most careful and deliberate consideration, we have concluded that we cannot accept the Board's view that the section 1841(d)(3) definition of "subsidiary," does not apply to "subsidiary" as it appears in the grandfather proviso. As we have heretofore discussed, the language of the statute, itself, provides a compelling indication that the Board's position is mistaken, and the Board's view finds no support in the pertinent legislative history. Cf. Western Bancshares, Inc. v. Board of Governors of the Federal Reserve System, 480 F.2d 749, 753-54 (10th Cir. 1973).
Our decision to reject the Board's interpretation of the questioned statutory provisions is further fortified by our inability to harmonize certain of the Board's prior decisions construing the similar controlling influence test that appears in the section 1841(a)(2) definition of "bank holding company." In Ribsco, Inc., 38 Fed.Reg. 7092 (1973), the Board refused to determine whether on June 30, 1968, Ribsco, a holding company, exercised a controlling influence over a particular bank. Ribsco had sought, through an
Our obligation in the imperfect process of statutory construction is to effectuate the Congressional intent, and, beyond doubt, the best evidence of that intent is the text of the statute itself. See Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum.L.Rev. 527, 535-38 (1947). We have found no evidence of a different Congressional intent that could justify our departing from the self-evident meaning of the statutory provisions here in question. Accordingly, we hold that the controlling influence definition of "subsidiary," which appears in section 1841(d)(3), applies to the word, "subsidiary," as it is used within the grandfather clause of section 1843(a)(2).
We further hold that an affected bank holding company must be able to initiate a Board determination as to whether the required controlling influence existed on June 30, 1968. To conclude otherwise would render the controlling influence test a nullity within the context of the grandfather clause, since there would be no party with both motivation and authority to set a controlling influence determination in motion. Interpretations that nullify statutory provisions or render them superfluous are, and should be, disfavored. See, e. g., Tabor v. Ulloa, 323 F.2d 823, 824 (9th Cir. 1963).
IV. Application of the Controlling Influence Test
Assuming arguendo that the section 1841(d)(3) definition of "subsidiary" does apply to "subsidiary" as it appears within the grandfather proviso, counsel for the Board have advanced two additional arguments concerning the proper application of the controlling influence test which, if correct, might serve to validate the Board's June 29, 1973, order of divestiture. Initially we note that these arguments are not mentioned in the Board Secretary's July 6, 1973, letter as rationales upon which the Board based its decision with respect to Patagonia. Rather, the arguments are counsels' post hoc rationalizations for the Board's action. As such, they are entitled to careful consideration, but not to the "great weight" accorded to carefully considered and articulated views set forth by the Board. Investment Company Institute v. Camp, 401 U.S. 617, 627-28, 91 S.Ct. 1091, 28 L.Ed.2d 367 (1971).
As discussed earlier, however, the Board's primary holding in Ribsco was that section 1841(a)(2)(C) does not entitle a holding company to a Board determination as to whether it exercised a controlling influence over a bank on June 30, 1968, for the purpose of conferring grandfather benefits. In Ribsco, the Board carefully stated its view that Congress added section 1841(a)(2)(C) to the Act only for the purpose of expanding the Board's jurisdiction. The Board's statement that a controlling influence determination cannot "relate back" to a date beyond its making was merely a corollary to the Board's principal position concerning the limited applicability of the controlling influence test.
It is true that when the Board undertakes a controlling influence determination for the purpose of extending its regulation to a bank holding company or a bank holding company subsidiary, the determination would need to be effective only as of the date of its making. Since we have rejected the Board's view that the controlling influence test cannot be applied for the purpose of conferring grandfather benefits, however, the Board's "relation-back" corollary also must fall. When the Board undertakes a controlling influence determination for the purpose of ascertaining a holding company's eligibility for grandfather benefits, the issue before the Board must be whether the asserted controlling influence existed on June 30, 1968, regardless of when the Board's determination is made.
Second, the Board's counsel argue that if the Board must determine whether Pima was Patagonia's subsidiary on June 30, 1968, it may do so only by applying the definitions of "subsidiary" that the Act contained on that date. As we have previously said, those definitions required the holding company either to vote 25 percent of the subsidiary's stock or elect a majority of the subsidiary's directors. See 12 U.S.C. §§ 1841(d)(1)-(d)(2) (1970). Counsel offer little support for this argument, and we have found none, either in the statute or the legislative history. The argument, again, would have the effect of rendering the controlling influence test a nullity within the context of the grandfather proviso, and we simply cannot believe that Congress intended such a result. Counsel brand the view that the Board could apply the controlling influence test to facts in existence on June 30, 1968, as a "retroactive" application of the 1970 Amendments, attempting, perhaps, to raise the traditional presumption against retroactivity. See, e. g., United States v. Perry, 431 F.2d 1020, 1023 (9th Cir. 1972). The attempt misses the mark. That a statute's operation depends, as here, upon the existence of antecedent facts does not give retroactive effect to the statute. Cox v. Hart, 260 U.S. 427, 435, 43 S.Ct. 154, 67 L.Ed. 332 (1922); Lohf v. Casey, 466 F.2d 618, 620 (10th Cir. 1972).
V. Increased Ownership of Pima Stock
In a more sweeping argument, the Board's counsel contend that even if Patagonia were entitled through the section 1843(a)(2) grandfather proviso to engage, through Pima, in the savings and loan business, the entitlement would not authorize Patagonia to increase its ownership in Pima beyond the 20.005 percent that it held on June 30, 1968. Counsel assert that the grandfather proviso permits a holding company to retain only those interests that it owned on the crucial date. In our view, this contention is thoroughly contradicted by the language
Section 1843(a)(2) clearly contemplates that bank holding companies may expand the activities for which they have grandfather rights. The section specifically prohibits such expansion ". . . through the acquisition . . of any interest in or the assets of a going concern engaged in such activities." The prohibition would be wholly superfluous if expansion were prohibited altogether.
The legislative record specifically states that internal expansion of grandfathered activities is permitted by the statute. In its report on the proposed legislation, the Senate Banking and Currency Committee, wherein the grandfather proviso originated, wrote:
S.Rep.No.91-1084, 91st Cong., 2d Sess. 5 (1970) (1970 U.S.Code Cong. & Admin. News, 5519, 5524).
The Board, on a recent occasion, has taken the position that a holding company may internally expand a grandfathered activity without prior Board approval. In a November 15, 1974, letter responding to an inquiry on behalf of the Purolator Corporation, CCH Fed.Banking L.Rep. ¶ 96,392 (1974), the Board concluded that a non-banking, grandfathered subsidiary of the Cameron Financial Corporation could expand its courier business to another state without prior Board approval. In pertinent part, the Board's letter reads:
Congress's reason for prohibiting the expansion of a grandfathered activity through the acquisition of an interest in, or the assets of, a "going concern" engaged in the grandfathered business was ". . . that such acquisition would tend to have an anticompetitive effect in that it would reduce the number of firms competing against each other in a given activity." S.Rep.No.91-1084, supra at 5 (1970 U.S.Code Cong. & Admin. News at p. 5524). If Patagonia already held Pima as a subsidiary on June 30, 1968, Patagonia's acquisition of the remainder of Pima's stock after that date could not reasonably be viewed as a violation of the "going concern" limitation. For Patagonia to have strengthened its already established power to control Pima would have had no adverse impact on the competition that existed among savings and loan institutions.
VI. The Type of Hearing to which Patagonia is Entitled
Finally, the Board contends that if section 1841(d)(3) requires it to make a determination whether Patagonia had
Patagonia's application for a section 1841(d)(3) controlling influence determination confronts the Board with a question of "adjudicative," not "legislative," fact. In the context of administrative law, legislative facts are those that affect an industry as a whole. An agency may resolve legislative questions through rule-making, relying on generalized data concerning an industry, the agency's special expertise, and policy considerations. The rules thereby evolved may be applied to particularized situations without formal hearings. Adjudicative facts are those that immediately affect only specific litigants. Questions of adjudicative fact must be resolved on the basis of the evidentiary submissions of the parties. They are the types of questions that in a trial would normally be submitted to a jury, or to a judge as the finder of facts. 1 K. Davis, Administrative Law Treatise § 7.02 (1958). Compare BankAmerica Corp. v. Board of Governors of the Federal Reserve System, 491 F.2d 985 (9th Cir. 1974) (presenting a question of legislative fact) with American Bancorporation, Inc. v. Board of Governors of the Federal Reserve System, 509 F.2d 29, 35-39 (8th Cir. 1974) (listing several questions of adjudicative fact). See O'Brien, Federal Reserve: Administrative Procedure and the Right to Be Heard under the Bank Holding Company Act, 91 Banking L.J. 856 (1974).
As to Patagonia, the Board must determine whether a particular business relationship existed between two business entities on a certain date. Disputed questions of adjudicative fact normally are not decided without affording to the party that may be adversely affected an evidentiary hearing in which that party has the opportunity to confront witnesses and to hear and contest the evidence against him. American Bancorporation, Inc. v. Board of Governors, supra at 37 (quoting 1 K. Davis, supra); see Commercial National Bank of Little Rock v. Board of Governors of the Federal Reserve System, 451 F.2d 86, 90-91 (8th Cir. 1971); O'Brien, supra.
The Board argues, nevertheless, that Patagonia's application failed to create a factual dispute that would require an adversary hearing. We disagree. The basic factual issue is whether Patagonia had the power to exercise the asserted controlling influence over Pima. Without attempting to identify all of the underlying questions, we note only that significant factual disputes exist. For example, Patagonia asserts that the three directors that it had placed on Pima's Board were able, through their influence, to control the Board's decisions. Patagonia submitted evidence, in the form of affidavits, to that effect. As is pointed out in the Board Secretary's July 6, 1973, letter, the Board, relying on the asserted prestige and influence
We also reject the Board's argument that Patagonia waived its right to a formal hearing by failing to demand such a hearing during the course of the Board's review of the propriety of Patagonia's 20.005 percent ownership of Pima on June 30, 1968. Relying on the Board's October 19, 1972, notice in the Federal Register, Patagonia justifiably considered the Board's determination as to its 20.005 percent ownership of Pima to be separate from its application for a controlling influence determination. As to the latter, Patagonia clearly requested an evidentiary hearing.
We cannot hold, as Patagonia has requested, that the documentary evidence it submitted to the Board established, as a matter of law, that the asserted power to exercise a controlling influence of Pima existed. But Patagonia's documentation did raise genuine factual disputes that must be resolved in a trial-type adversary hearing before the Board.
Since the Board, on remand, must make a de novo determination, we need not reach the merits of Patagonia's final contention, i. e., that in the Board's prior review of Patagonia's application, the Board erroneously defined the statutory term, "controlling influence." On remand, the Board will also direct its consideration to this contention.
The challenged Order, requiring Patagonia to divest itself of that portion of Pima's stock that Patagonia acquired after June 30, 1968, is vacated,
38 Fed.Reg. 18411, 18412, 59 Fed.Res.Bull. 539, 540 (1973). Section 4(c)(8) of the Act, 12 U.S.C. § 1843(c)(8) (1970), exempts from the section 1843(a)(2) ban against non-banking activities those activities that the Board has determined to be banking-related. To obtain authorization to retain its full ownership of Pima under section 1843(c)(8), Patagonia would need to convince the Board, in rule-making proceedings, to reverse its current position, see text accompanying n.5, supra, that, as to the banking industry as a whole, the savings and loan business is not banking-related.
We do not agree with the Board's suggestion that the statutory language of the 1970 Amendments is unclear as to whether the definition of "subsidiary" in section 1841(d) applies to the word, "subsidiary," as it is used within the grandfather proviso. Cameron Financial Corp. v. Board of Governors, 497 F.2d 841 (4th Cir. 1974), upon which the Board relies, involves a different question. There, the court found ambiguity as to whether the word, "subsidiary," in the grandfather proviso includes both banking and non-banking subsidiaries. The definition of "subsidiary" in section 1841(d)(3) does not expressly address the question, and the section heading of section 1843(a) provided support for the proposition that the word, "subsidiary," in the grandfather proviso, could not include a banking subsidiary.