Watters v. Wachovia Bank, N.A., 550 U.S. 1 (2007)

Respondent Wachovia Bank is an OCC-chartered national banking as sociation that conducts its real estate lending business through respond [p. 2] ent Wachovia Mortgage Corporation, a wholly owned, North Carolina chartered entity licensed as an operating subsidiary by OCC, and doing business in Michigan and elsewhere. Michigan law exempts banks, both national and state, from state mortgage lending regulation, but requires their subsidiaries to register with the State’s Office of Financial and Insurance Services (OFIS) and submit to state supervision. Al though Wachovia Mortgage initially complied with Michigan’s require ments, it surrendered its Michigan registration once it became a wholly owned operating subsidiary of Wachovia Bank. Subsequently, peti tioner Watters, the OFIS commissioner, advised Wachovia Mortgage it would no longer be authorized to engage in mortgage lending in Michi gan. Respondents sued for declaratory and injunctive relief, contend ing that the NBA and OCC’s regulations preempt application of the relevant Michigan mortgage lending laws to a national bank’s operating subsidiary. Watters responded that, because Wachovia Mortgage was not itself a national bank, the challenged Michigan laws were applicable and were not preempted. She also argued that the Tenth Amendment to the U. S. Constitution prohibits OCC’s exclusive regulation and super vision of national banks’ lending activities conducted through operating subsidiaries. Rejecting those arguments, the Federal District Court granted the Wachovia plaintiffs summary judgment in relevant part, and the Sixth Circuit affirmed.

(a) The NBA vests in nationally chartered banks enumerated pow ers and all “necessary” incidental powers. 12 U. S. C. § 24 Seventh. To prevent inconsistent or intrusive state regulation, the NBA provides that “[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law . . . .” § 484(a). Federally chartered banks are subject to state laws of general application in their daily busi ness to the extent such laws do not conflict with the letter or purposes of the NBA. But when state prescriptions significantly impair the ex ercise of authority, enumerated or incidental under the NBA, the State’s regulations must give way. E. g., Barnett Bank of Marion Cty., N. A. v. Nelson, 517 U. S. 25, 32–34. The NBA expressly authorizes national banks to engage in mortgage lending, subject to OCC regulation, § 371(a). State law may not significantly burden a bank’s exercise of that power, see, e. g., id., at 33–34. In particular, real estate lending, when conducted by a national bank, is immune from state visitorial con [p. 3] trol: The NBA specifically vests exclusive authority to examine and in spect in OCC. 12 U. S. C. § 484(a). The Michigan provisions at issue exempt national banks themselves from coverage. This is not simply a matter of the Michigan Legislature’s grace. For, as the parties recog nize, the NBA would spare a national bank from state controls of the kind here involved. Pp. 10–15.

Watters contends that if Congress meant to deny States visitorial powers over operating subsidiaries, it would have written § 484(a)’s ban on state inspection to apply not only to national banks but also to their affiliates. She points out that § 481, which authorizes OCC to examine “affiliates” of national banks, does not speak to state visitorial powers. This argument fails for two reasons. First, any intention regarding operating subsidiaries cannot be ascribed to the 1864 Congress that enacted §§ 481 and 484, or the 1933 Congress that added the affiliate examination provisions to § 481 and the “affiliate” definition to § 221a, because operating subsidiaries were not authorized until 1966. Second, Watters ignores the distinctions Congress recognized among “affiliates.” Unlike affiliates that may engage in functions not authorized by the NBA, an operating subsidiary is tightly tied to its parent by the [p. 4] specification that it may engage only in “the business of banking,” § 24a(g)(3)(A). Notably, when Congress amended the NBA to provide that operating subsidiaries may “engag[e] solely in activities that na tional banks are permitted to engage in directly,” ibid., it did so in an Act providing that other affiliates, authorized to engage in nonbanking financial activities, e. g., securities and insurance, are subject to state regulation in connection with those activities, see, e. g., §§ 1843(k), 1844(c)(4). Pp. 15–20.

Business activities of national banks are controlled by the National Bank Act (NBA or Act), 12 U. S. C. § 1 et seq., and regulations promulgated thereunder by the Office of the Comptroller of the Currency (OCC). See §§ 24, 93a, 371(a). As the agency charged by Congress with supervision of the NBA, OCC oversees the operations of national banks and their interactions with customers. See NationsBank of N. C., N. A. v. Variable Annuity Life Ins. Co., 513 U. S. 251, 254, 256 (1995). The agency exercises visitorial powers, in cluding the authority to audit the bank’s books and records, [p. 7] largely to the exclusion of other governmental entities, state or federal. See § 484(a); 12 CFR § 7.4000 (2006).

On January 1, 2003, Wachovia Mortgage became a wholly owned operating subsidiary of Wachovia Bank. Three [p. 9] months later, Wachovia Mortgage advised the State of Michi gan that it was surrendering its mortgage lending registra tion. Because it had become an operating subsidiary of a national bank, Wachovia Mortgage maintained, Michigan’s registration and inspection requirements were preempted. Watters responded with a letter advising Wachovia Mort gage that it would no longer be authorized to conduct mort gage lending activities in Michigan.

Wachovia Mortgage and Wachovia Bank filed suit against Watters, in her official capacity as commissioner, in the United States District Court for the Western District of Michigan. They sought declaratory and injunctive relief prohibiting Watters from enforcing Michigan’s registration prescriptions against Wachovia Mortgage, and from interfer ing with OCC’s exclusive visitorial authority. The NBA and regulations promulgated thereunder, they urged, vest super visory authority in OCC and preempt the application of the state-law controls at issue. Specifically, Wachovia Mortgage and Wachovia Bank challenged as preempted certain pro visions of two Michigan statutes—the Mortgage Brokers, Lenders, and Services Licensing Act and the Secondary Mortgage Loan Act. The challenged provisions (1) require mortgage lenders—including national bank operating sub sidiaries but not national banks themselves—to register and pay fees to the State before they may conduct banking activities in Michigan, and authorize the commissioner to deny or revoke registrations, §§ 445.1652(1) (West Supp. 2006), 445.1656(1)(d) (West 2002), 445.1657(1), 445.1658, 445.1679(1)(a), 493.52(1) (West 1998), 493.53a(d), 493.54, 493.55(4), 493.56a(2), and 493.61; (2) require submission of an nual financial statements to the commissioner and retention of certain documents in a particular format, §§ 445.1657(2) (West 2002), 445.1671, 493.56a(2) (West 1998); (3) grant the commissioner inspection and enforcement authority over registrants, §§ 445.1661 (West 2002), 493.56b (West Supp. [p. 10] 2005); and (4) authorize the commissioner to take regulatory or enforcement actions against covered lenders, §§ 445.1665 (West 2002), 445.1666, 493.58–59, and 493.62a (West 1998).

Nearly 200 years ago, in McCulloch v. Maryland, 4 Wheat. 316 (1819), this Court held federal law supreme over state law with respect to national banking. Though the bank at issue in McCulloch was short-lived, a federal banking sys tem reemerged in the Civil War era. See Atherton v. FDIC, 519 U. S. 213, 221–222 (1997); B. Hammond, Banks and Poli tics in America: from the Revolution to the Civil War (1957). In 1864, Congress enacted the NBA, establishing the system of national banking still in place today. National Bank Act, [p. 11] ch. 106, 13 Stat. 99;3 Atherton, 519 U. S., at 222; Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp., 439 U. S. 299, 310, 314–315 (1978). The Act vested in nation ally chartered banks enumerated powers and “all such inci dental powers as shall be necessary to carry on the business of banking.” 12 U. S. C. § 24 Seventh. To prevent incon sistent or intrusive state regulation from impairing the na tional system, Congress provided: “No national bank shall be subject to any visitorial powers except as authorized by Federal law . . . .” § 484(a).

In the years since the NBA’s enactment, we have repeat edly made clear that federal control shields national banking from unduly burdensome and duplicative state regulation. See, e. g., Beneficial Nat. Bank v. Anderson, 539 U. S. 1, 10 (2003) (national banking system protected from “possible un friendly State legislation” (quoting Tiffany v. National Bank of Mo., 18 Wall. 409, 412 (1874))). Federally chartered banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the let ter or the general purposes of the NBA. Davis v. Elmira Savings Bank, 161 U. S. 275, 290 (1896). See also Atherton, 519 U. S., at 223. For example, state usury laws govern the maximum rate of interest national banks can charge on loans, 12 U. S. C. § 85, contracts made by national banks “are gov erned and construed by State laws,” National Bank v. Com monwealth, 9 Wall. 353, 362 (1870), and national banks’ “ac quisition and transfer of property [are] based on State law,” ibid. However, “the States can exercise no control over [na tional banks], nor in any wise affect their operation, except in so far as Congress may see proper to permit. Any thing beyond this is an abuse, because it is the usurpation of power which a single State cannot give.” Farmers’ and Mechan [p. 12] ics’ Nat. Bank v. Dearing, 91 U. S. 29, 34 (1875) (internal quotation marks omitted).

Harmoniously, the Michigan provisions at issue exempt national banks from coverage. Mich. Comp. Laws Ann. § 445.1675(a) (West 2002). This is not simply a matter of the Michigan Legislature’s grace. Cf. post, at 34, and n. 17. For, as the parties recognize, the NBA would have preemp tive force, i. e., it would spare a national bank from state controls of the kind here involved. See Brief for Petitioner 12; Brief for Respondents 14; Brief for United States as Ami cus Curiae 9. State laws that conditioned national banks’ real estate lending on registration with the State, and sub jected such lending to the State’s investigative and enforce ment machinery would surely interfere with the banks’ fed erally authorized business: National banks would be subject to registration, inspection, and enforcement regimes im posed not just by Michigan, but by all States in which the banks operate.6 Diverse and duplicative superintendence of [p. 14] national banks’ engagement in the business of banking, we observed over a century ago, is precisely what the NBA was designed to prevent: “Th[e] legislation has in view the erec tion of a system extending throughout the country, and inde pendent, so far as powers conferred are concerned, of state legislation which, if permitted to be applicable, might impose limitations and restrictions as various and as numerous as the States.” Easton v. Iowa, 188 U. S. 220, 229 (1903). Congress did not intend, we explained, “to leave the field open for the States to attempt to promote the welfare and stability of national banks by direct legislation. . . . [C]on fusion would necessarily result from control possessed and exercised by two independent authorities.” Id., at 231–232.

Recognizing the burdens and undue duplication state con trols could produce, Congress included in the NBA an ex press command: “No national bank shall be subject to any visitorial powers except as authorized by Federal law . . . .” 12 U. S. C. § 484(a). See supra, at 11–12, 13; post, at 31 (ac knowledging that national banks have been “exemp[t] from state visitorial authority . . . for more than 140 years”). “Visitation,” we have explained “is the act of a superior or superintending officer, who visits a corporation to examine into its manner of conducting business, and enforce an ob servance of its laws and regulations.” Guthrie v. Harkness, 199 U. S. 148, 158 (1905) (internal quotation marks omitted). See also 12 CFR § 7.4000(a)(2) (2006) (defining “visitorial” power as “(i) [e]xamination of a bank; (ii) [i]nspection of a bank’s books and records; (iii) [r]egulation and supervision of activities authorized or permitted pursuant to federal bank ing law; and (iv) [e]nforcing compliance with any applicable federal or state laws concerning those activities”). Michi gan, therefore, cannot confer on its commissioner examina [p. 15] tion and enforcement authority over mortgage lending, or any other banking business done by national banks.7

Since 1966, OCC has recognized the “incidental” authority of national banks under § 24 Seventh to do business through [p. 16] operating subsidiaries. See 31 Fed. Reg. 11459–11460 (1966); 12 CFR § 5.34(e)(1) (2006) (“A national bank may con duct in an operating subsidiary activities that are permissi ble for a national bank to engage in directly either as part of, or incidental to, the business of banking . . . .”). That authority is uncontested by Michigan’s commissioner. See Brief for Petitioner 21 (“[N]o one disputes that 12 USC § 24 (Seventh) authorizes national banks to use nonbank operat ing subsidiaries . . . .”). OCC licenses and oversees national bank operating subsidiaries just as it does national banks. § 5.34(e)(3) (“An operating subsidiary conducts activities au thorized under this section pursuant to the same authoriza tion, terms and conditions that apply to the conduct of such activities by its parent national bank.”);8 United States Of fice of the Comptroller of the Currency, Related Organiza tions: Comptroller’s Handbook 53 (Aug. 2004) (hereinafter Comptroller’s Handbook) (“Operating subsidiaries are sub ject to the same supervision and regulation as the parent bank, except where otherwise provided by law or OCC regulation.”).

In 1999, Congress defined and regulated “financial” sub sidiaries; simultaneously, Congress distinguished those na tional bank affiliates from subsidiaries—typed “operating subsidiaries” by OCC—which may engage only in activi ties national banks may engage in directly, “subject to the same terms and conditions that govern the conduct of such activities by national banks.” Gramm-Leach-Bliley Act (GLBA), § 121(a)(2), 113 Stat. 1378 (codified at 12 U. S. C. [p. 17] § 24a(g)(3)(A)).9 For supervisory purposes, OCC treats na tional banks and their operating subsidiaries as a single eco nomic enterprise. Comptroller’s Handbook 64. OCC over sees both entities by reference to “business line,” applying the same controls whether banking “activities are conducted directly or through an operating subsidiary.” Ibid.10

As earlier noted, Watters does not contest the authority of national banks to do business through operating subsidiaries. Nor does she dispute OCC’s authority to supervise and regu late operating subsidiaries in the same manner as national banks. Still, Watters seeks to impose state regulation on operating subsidiaries over and above regulation undertaken by OCC. But just as duplicative state examination, supervi sion, and regulation would significantly burden mortgage lending when engaged in by national banks, see supra, at [p. 18] 11–15, so too would those state controls interfere with that same activity when engaged in by an operating subsidiary.

Security against significant interference by state regula tors is a characteristic condition of the “business of banking” conducted by national banks, and mortgage lending is one aspect of that business. See, e. g., 12 U. S C. § 484(a); 12 CFR § 34.4(a)(1) (2006). See also supra, at 11–15; post, at 27 (acknowledging that, in 1982, Congress broadly authorized national banks to engage in mortgage lending); post, at 36–37, and n. 20 (acknowledging that operating subsidiaries “are subject to the same federal oversight as their national bank [p. 19] parents”). That security should adhere whether the busi ness is conducted by the bank itself or is assigned to an oper ating subsidiary licensed by OCC whose authority to carry on the business coincides completely with that of the bank. See Wells Fargo Bank, N. A. v. Boutris, 419 F. 3d 949, 960 (CA9 2005) (determination whether to conduct business through operating subsidiaries or through subdivisions is “essentially one of internal organization”).

Second, Watters ignores the distinctions Congress recog nized among “affiliates.” The NBA broadly defines the term “affiliate” to include “any corporation” controlled by a na tional bank, including a subsidiary. See 12 U. S. C. § 221a(b). An operating subsidiary is therefore one type of “affiliate.” But unlike affiliates that may engage in functions not author ized by the NBA, e. g., financial subsidiaries, an operating subsidiary is tightly tied to its parent by the specification that it may engage only in “the business of banking” as au thorized by the Act. § 24a(g)(3)(A); 12 CFR § 5.34(e)(1) [p. 20] (2006). See also supra, at 16–17, and n. 10. Notably, when Congress amended the NBA confirming that operating sub sidiaries may “engag[e] solely in activities that national banks are permitted to engage in directly,” 12 U. S. C. § 24a(g)(3)(A), it did so in an Act, the GLBA, providing that other affiliates, authorized to engage in nonbanking financial activities, e. g., securities and insurance, are subject to state regulation in connection with those activities. See, e. g., §§ 1843(k), 1844(c)(4). See also 15 U. S. C. § 6701(b) (any per son who sells insurance must obtain a state license to do so).12

Recognizing the necessary consequence of national banks’ authority to engage in mortgage lending through an operat ing subsidiary “subject to the same terms and conditions that govern the conduct of such activities by national banks,” 12 U. S. C. § 24a(g)(3)(A), see also § 24 Seventh, OCC promul gated 12 CFR § 7.4006 (2006): “Unless otherwise provided by Federal law or OCC regulation, State laws apply to national bank operating subsidiaries to the same extent that those laws apply to the parent national bank.” See Investment Securities; Bank Activities and Operations; Leasing, 66 Fed. Reg. 34784, 34788 (2001). Watters disputes the authority of OCC to promulgate this regulation and contends that, be cause preemption is a legal question for determination by courts, § 7.4006 should attract no deference. See also post, at 38–43. This argument is beside the point, for under our interpretation of the statute, the level of deference owed to the regulation is an academic question. Section 7.4006 [p. 21] merely clarifies and confirms what the NBA already conveys: A national bank has the power to engage in real estate lend ing through an operating subsidiary, subject to the same terms and conditions that govern the national bank itself; that power cannot be significantly impaired or impeded by state law. See, e. g., Barnett Bank, 517 U. S., at 33–34; 12 U. S. C. §§ 24 Seventh, 24a(g)(3)(A), 371.13

This Court has consistently recognized that because fed eral law is generally interstitial, national banks must comply [p. 24] with most of the same rules as their state counterparts. As early as 1870, we articulated the principle that has remained the lodestar of our jurisprudence: that national banks

For the same reasons, we observed in First Nat. Bank in Plant City v. Dickinson, 396 U. S. 122, 133 (1969), that “[t]he policy of competitive equality is . . . firmly embedded in the statutes governing the national banking system.” So firmly embedded, in fact, that “the congressional policy of competi [p. 26] tive equality with its deference to state standards” is not “open to modification by the Comptroller of the Currency.” Id., at 138.

Second, Congress has over the years both curtailed and expanded the ability of national banks to affiliate with other companies. In the early part of the century, banks routinely engaged in investment activities and affiliated with compa nies that did the same. The Glass-Steagall Act put an end to that. “[E]nacted in 1933 to protect bank depositors from any repetition of the widespread bank closings that occurred [p. 28] during the Great Depression,” Board of Governors, FRS v. Investment Company Institute, 450 U. S. 46, 61 (1981), Glass-Steagall prohibited Federal Reserve member banks (both state and national) from affiliating with investment banks.10 In Congress’ view, the affiliates had engaged in speculative activities that in turn contributed to commercial banks’ Depression-era failures.11 It was this focus on the welfare of depositors—as opposed to stockholders—that pro vided the basis for legislative action designed to ensure bank solvency.

These congressional restrictions did not forbid all affilia tions, however, and national banks began experimenting with new corporate forms. One of those forms involved the national bank ownership of “operating subsidiaries.” In 1966, the Comptroller of the Currency took the position “that [p. 29] a national bank may acquire and hold the controlling stock interest in a subsidiary operations corporation” so long as that corporation’s “functions or activities . . . are limited to one or several of the functions or activities that a national bank is authorized to carry on.” 31 Fed. Reg. 11459 (1966). The Comptroller declined to read the categorical prohibition on national bank ownership of stock to foreclose bank owner ship of operating subsidiaries, finding authority for this ag gressive interpretation of national bank authority in the “in cidental powers” provision of 12 U. S. C. § 24 Seventh. See 31 Fed. Reg. 11460.

Congress overruled this OCC regulation in 1999 in the Gramm-Leach-Bliley Act (GLBA), 113 Stat. 1338. The GLBA was a seminal piece of banking legislation inasmuch as it repealed the Glass-Steagall Act’s ban on affiliations be tween commercial and investment banks. See § 101, id., at 1341. More relevant to this case, however, the GLBA ad dressed the powers of national banks to own subsidiary cor porations. The Act provided that any national bank subsid [p. 30] iary engaging in activities forbidden to the parent bank would be considered a “financial subsidiary,” § 121, id., at 1380, and would be subjected to heightened regulatory obli gations, see, e. g., 12 U. S. C. § 371c–1(a)(1). The GLBA’s definition of “financial subsidiaries” excluded those subsidiar ies that “engag[e] solely in activities that national banks are permitted to engage in directly and are conducted subject to the same terms and conditions that govern the conduct of such activities by national banks.” § 24a(g)(3).

In sum, Congress itself has never authorized national banks to use subsidiaries incorporated under state law to perform traditional banking functions. Nor has it author ized the OCC to “license” any state-chartered entity to do so. The fact that it may have acquiesced in the OCC’s expansive [p. 31] interpretation of its authority is a plainly insufficient basis for finding pre-emption.

This is not, contrary to the Court’s suggestion, see ante, at 19–20, some kind of oversight. As the complex history of the banking laws demonstrates, Congress has legislated extensively with respect to national bank “affiliates”—an op erating subsidiary is one type of affiliate15—and has more [p. 32] over given the OCC extensive supervisory powers over those affiliates, see § 481 (providing that a federal examiner “shall have power to make a thorough examination of all the affairs of [a national bank] affiliate, and in doing so he shall have power . . . to make a report of his findings to the Comp troller of the Currency”). That Congress lavished such attention on national bank affiliates and conferred such far-reaching authority on the OCC without ever expanding the scope of § 484(a) speaks volumes about Congress’ pre emptive intent, or rather its lack thereof. Consistent with our presumption against pre-emption—a presumption I do not understand the Court to reject—I would read § 484(a) to reflect Congress’ considered judgment not to pre-empt the application of state visitorial laws to national bank “affiliates.”

Instead, the Court likens § 484(a) to a congressional after thought, musing that it merely “[r]ecogniz[es] the burdens and undue duplication state controls could produce.” Ante, at 14. By that logic, I take it the Court believes that the NBA would impliedly pre-empt all state visitorial laws as applied to national banks even if § 484(a) did not exist. That is surprising and unlikely. Not only would it reduce the NBA’s express pre-emption provision to so much surplus age, but it would give Congress’ silence greater statutory dignity than an express command. Perhaps that explains why none of the four Circuits to have addressed this issue relied on the pre-emptive force of the NBA itself. Each in stead asked whether the OCC’s regulations pre-empted state laws.16 Stranger still, the Court’s reasoning would suggest [p. 33] that operating subsidiaries have been exempted from state visitorial authority from the moment the OCC first author ized them in 1966. See 31 Fed. Reg. 11459. Yet if that were true, surely at some point over the last 40 years some national bank would have gone to court to spare its subsidi aries from the yoke of state regulation; national banks are neither heedless of their rights nor shy of litigation. But respondents point us to no such cases that predate the OCC’s pre-emption regulations.

The Court also puts great weight on Barnett Bank’s refer ence to our “history . . . of interpreting grants of both enu merated and incidental ‘powers’ to national banks as grants of authority not normally limited by, but rather ordinarily pre-empting, contrary state law.” Id., at 32. The Court ne glects to mention that Barnett Bank is quite clear that this interpretive rule applies only when Congress has failed (as it often does) to manifest an explicit pre-emptive intent. Id., at 31. “In that event, courts must consider whether the federal statute’s ‘structure and purpose,’ or nonspecific stat utory language, nonetheless reveal a clear, but implicit, pre emptive intent.” Ibid. (emphasis added). Barnett Bank [p. 34] nowhere holds that we can ignore strong indicia of congres sional intent whenever a state law arguably trenches on na tional bank powers. After all, the case emphasized that the question of pre-emption “is basically one of congressional in tent. Did Congress, in enacting the Federal Statute, intend to exercise its constitutionally delegated authority to set aside the laws of a State?” Id., at 30. The answer here is a resounding no.

Again, however, it is beside the point whether in the Court’s judgment the Michigan laws will hamper national banks’ ability to carry out their banking functions through operating subsidiaries. It is Congress’ judgment that mat ters here, and Congress has in the NBA pre-empted only those laws purporting to lodge with state authorities visito rial power over national banks. 12 U. S. C. § 484(a). In my view, the Court’s eagerness to infuse congressional silence with pre-emptive force threatens the vitality of most state laws as applied to national banks—a result at odds with the long and unbroken history of dual state and federal authority over national banks, not to mention our federal system of government. It is especially troubling that the Court so blithely pre-empts Michigan laws designed to protect con sumers. Consumer protection is quintessentially a “field [p. 36] which the States have traditionally occupied,” Rice, 331 U. S., at 230;19 the Court should therefore have been all the more reluctant to conclude that the “clear and manifest pur pose of Congress” was to set aside the laws of a sovereign State, ibid.

The phrase “same terms and conditions” appears in the definition of “financial subsidiary,” not in a provision of the statute conferring national bank powers. Even there, it serves only to describe what a financial subsidiary is not. See § 24a(g)(3) (defining financial subsidiary as any subsid iary “other than a subsidiary that . . . engages solely in activi ties that national banks are permitted to engage in directly and are conducted subject to the same terms and conditions that govern the conduct of such activities by national banks”). Apart from this slanting reference, the GLBA never mentions operating subsidiaries. Far from a demon stration that the “clear and manifest purpose of Congress” was to pre-empt the type of law at issue here, Rice, 331 U. S., at 230, the “same terms and conditions” language at most reflects an uncontroversial acknowledgment that operating subsidiaries of national banks are subject to the same federal [p. 37] oversight as their national bank parents.20 It has nothing to do with pre-emption.

Even assuming that the phrase has something to do with pre-emption, it is simply not the case that the nonencroach ment of state regulation is a “term and condition” of engage ment in the business of banking. As a historical matter, state laws have always applied to national banks and have often encroached on the business of banking. See National Bank, 9 Wall., at 362 (observing that national banks “are sub ject to the laws of the State, and are governed in their daily course of business far more by the laws of the State than of the nation”). The Court itself acknowledges that state usury, contract, and property law govern the activities of [p. 38] national banks and their subsidiaries, ante, at 11–12, notwith standing that they vary across “all States in which the banks operate,” ante, at 13. State law has always provided the legal backdrop against which national banks make real estate loans, and “[t]he fact that the banking agencies maintain a close surveillance of the industry with a view toward pre venting unsound practices that might impair liquidity or lead to insolvency does not make federal banking regulation all pervasive.” United States v. Philadelphia Nat. Bank, 374 U. S. 321, 352 (1963).

To begin with, Congress knows how to authorize executive agencies to pre-empt state laws.21 It has not done so here. [p. 39] Nor does the statutory provision authorizing banks to en gage in certain lines of business that are “incidental” to their primary business of accepting and managing the funds of de positors expressly or implicitly grant the OCC the power to immunize banks or their subsidiaries from state regulation.22 See 12 U. S. C. § 24 Seventh. For there is a vast and obvious difference between rules authorizing or regulating conduct and rules granting immunity from regulation. The Comp troller may well have the authority to decide whether the activities of a mortgage broker, a real estate broker, or a travel agent should be characterized as “incidental” to bank ing, and to approve a bank’s entry into those businesses, either directly or through its subsidiaries. See, e. g., Na tionsBank of N. C., N. A. v. Variable Annuity Life Ins. Co., 513 U. S. 251, 258 (1995) (upholding the OCC’s interpretation of the “incidental powers” provision to permit national banks to serve as agents in annuity sales). But that lesser power does not imply the far greater power to immunize banks or their subsidiaries from state laws regulating the conduct of their competitors.23 As we said almost 40 years ago, “the [p. 40] congressional policy of competitive equality with its defer ence to state standards” is not “open to modification by the Comptroller of the Currency.” Plant City, 396 U. S., at 138.24

In any event, neither of the two justifications the OCC advanced when it promulgated 12 CFR § 7.4006 withstand Chevron analysis. First, the OCC observed that the GLBA “expressly acknowledged the authority of national banks to own subsidiaries” that conduct national bank activities “ ‘subject to the same terms and conditions that govern the conduct of such activities by national banks.’ ” 66 Fed. Reg. 34788 (quoting 12 U. S. C. § 24a(g)(3)). The agency also noted that it had folded the “ ‘same terms and conditions’ ” language into an implementing regulation, 66 Fed. Reg. [p. 42] 34788 (citing 12 CFR § 5.34(e)(3) (2001)). According to the OCC, “[a] fundamental component of these descriptions of the characteristics of operating subsidiaries in GLBA and the OCC’s rule is that state laws apply to operating subsidi aries to the same extent as they apply to the parent national bank.” 66 Fed. Reg. 34788.

Second, the OCC describes operating subsidiaries “as the equivalent of departments or divisions of their parent banks,” 66 Fed. Reg. 34788, which, through the operation of 12 U. S. C. § 484(a), would not be subject to state visitorial powers. The OCC claims that national banks might desire to conduct their business through operating subsidiaries for the purposes of “controlling operations costs, improving ef fectiveness of supervision, more accurate determination of profits, decentralizing management decisions [and] separat ing particular operations of the bank from other operations.” Brief for United States as Amicus Curiae 19 (quoting 31 [p. 43] Fed. Reg. 11460). It is obvious, however, that a national bank could realize all of those benefits through the straight forward expedient of dissolving the corporation and making it in fact a “department” or a “division” of the parent bank.

The novelty of today’s holding merits a final comment. Whatever the Court says, this is a case about an administra tive agency’s power to pre-empt state laws. I agree with the Court that the Tenth Amendment does not preclude the [p. 44] exercise of that power. But the fact that that Amendment was included in the Bill of Rights should nevertheless remind the Court that its ruling affects the allocation of powers among sovereigns. Indeed, the reasons for adopting that Amendment are precisely those that undergird the well established presumption against pre-emption.