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Hartigan v. Federal Home Loan Bank Board and Federal Savings and Loan Insurance Corp.

October 22, 1984

NEIL F. HARTIGAN, ATTORNEY GENERAL OF THE STATE OF ILLINOIS, STATE OF ILLINOIS AND PEOPLE OF THE STATE OF ILLINOIS, EX REL., NEIL F. HARTIGAN, ILLINOIS BANKERS ASSOCIATION, AND EUGENE P. HEYTOW, PETITIONERS,
v.
FEDERAL HOME LOAN BANK BOARD AND FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, RESPONDENTS



Petitions for Review of an Order of the Federal Home Loan Bank Board and Federal Savings and Loan Insurance Corp.

Author: Bauer

Before BAUER, POSNER, and COFFEY, Circuit Judges.

BAUER, Circuit Judge.

I. FACTS

First Federal Savings and Loan Association (First Federal) was a large, federally-chartered, mutual savings and loan association with headquarters in Chicago, Illinois. Beginning in 1980, the Federal Savings and Loan Insurance Corporation (FSLIC or the Corporation) and its operating head, the Federal Home Loan Bank Board (Bank Board), became increasingly concerned about First Federal's operating losses, declining net worth, and other financial difficulties. First Federal's losses during the year ended December 31, 1981, increased to $51.6 million, reducing the net worth of the institution to roughly half of its level at the end of 1980. Monthly losses during the first quarter of 1982 continued at an even greater rate.

FSLIC and the Bank Board felt that First Federal's financial decline posed a substantial risk to FSLIC's insurance fund and to public confidence in savings and loan associations generally. FSLIC concluded, therefore, that the best hope for protecting both First Federal's depositors and FSLIC's insurance fund would be to provide financial assistance to First Federal on an interim basis until a permanent solution could be devised. Thus First Federal and another troubled Illinois savings and loan were merged to create a "phoenix association -- a troubled institution kept in operation on a temporary basis through substantial financial assistance from FSLIC.

FSLIC's financial assistance to First Federal through the phoenix program did not end the institution's problems. Its financial condition continued to deteriorate. First Federal's loss for the fiscal year ended December 31, 1982, was $68.1 million. Even with the provision of over $86 million in FSLIC assistance, First Federal's losses continued through the first ten months of 1983 at a rate of nearly $4.4 million per month.

In 1982, Congress enacted the Garn-St. Germain Depository Institutions Act of 1982. Pub. L. No. 97-320, 96 Stat. 1469 (1982) (Garn Act). Title I of the Garn Act was passed in response to "the increasing number of supervisory mergers arranged and, in many cases, assisted by the Federal insuring agencies." S. REP. NO. 536, 97th Cong., 2nd Sess. 3 (1982), reprinted in 1982 U.S. CODE CONG. & AD. NEWS 3054, 3057. Section 123 of the Garn Act, 12 U.S.C. 1730a(m), amended the National Housing Act to give FSLIC and the Bank Board "[expanded] powers to assist troubled thrift institutions." Id. at 7, 1982 U.S. CODE CONG. & AD. NEWS at 3061. These "expanded powers" expire October 15, 1985.

Pursuant to its expanded powers under Section 123, FSLIC determined that "severe financial conditions exist[ed] which threaten[ed] the stability" of First Federal. 12 U.S.C. § 1730a(m)(1)(A)(i). FSLIC and the Bank Board determined that the best hope for a permanent solution to First Federal's financial difficulties was to encourage a responsible and financially sound institution to assist FSLIC by acquiring First Federal and thereby buttressing its financial strength. FSLIC therefore held a conference in Chicago on April 28, 1983, to solicit proposals for a solution to First Federal's financial difficulties. FSLIC received only seven proposals to acquire First Federal.

On December 15, 1983, the Bank Board met to consider First Federal's financial status and determined, on the basis of detailed financial statements prepared by FSLIC, that the Citicorp proposal presented the only attractive opportunity for solving the problem. The Bank Board thus authorized the acquisition of First Federal by a subsidiary of Citicorp. The Bank Board submitted the proposal to the Federal Reserve Board (FRB) for approval and asked the FRB to expedite its decision on the acquisition. The FRB held an informal hearing on the acquisition on January 11, 1984, and on January 20, 1984, entered an order approving the acquisition subject to certain conditions.

On January 6, 1984, the State of Illinois filed a petition in this court to set aside or otherwise review FSLIC's and the Bank Board's authorization of the acquisition. Shortly thereafter, Eugene P. Heytow, one of the seven bidders for acquisition of First Federal, and the Illinois Bankers Association (IBA) also filed petitions challenging the Bank Board's action. The Bank Board and FSLIC immediately moved to dismiss the petition, and raised issues of this court's jurisdiction, standing, and permissible scope of review.

Illinois, Heytow, and the IBA (collectively "Petitioners") sought a stay of the Bank Board's authorization and sought to prevent FSLIC from pursuing the regulatory solution to First Federal's problems. After full briefing, a panel of this court on January 17, 1984, denied the motions for a stay pending review and established a briefing schedule on the consolidated petitions, and ordered that the parties address the questions of jurisdiction and standing in their briefs on the merits.

II. JURISDICTION

Under the Administrative Procedure Act an administrative decision is immune from judicial review only if review is expressly precluded by statute or if the agency's action is "committed to agency discretion by law." 5 U.S.C. § 701(a) (1976). This exception is a narrow one; there is a presumption in favor of judicial review. Absent express words in the statute to the contrary, this presumption can be overcome only by "clear and convincing evidence of legislative intent to restrict access" of an aggrieved party to judicial review. Abbott Laboratories v. Gardner, 387 U.S. 136, 141, 87 S. Ct. 1507, 18 L. Ed. 2d 681 (1967). The "committed to agency discretion" exception arises only when the statute is drawn in such broad terms that "in a given case there is no law to apply." Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 410, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971).

Section 123 of the Garn Act, 12 U.S.C. § 1730a(m) (1982), sets forth the emergency thrift acquisition procedures at issue in this case. Section 123 does not expressly preclude judicial review of FSLIC merger decisions, and the Corporation does not argue that such an express preclusion exists in Section 123. Rather, the Corporation relies upon Section 123(1)(A)(i) and (ii) to support its claim that the Bank Board's exercise of its emergency authority is committed to agency discretion by law.*fn1 The Petitioners, on the other hand, contend that because Section 123 of the Garn Act amends Section 408 of the National Housing Act, 12 U.S.C. § 1730a, Section 123 must therefore be subject to the review provision of Section 408, 12 U.S.C. § 1730a(k).

We think that it is clear that Congress did not manifest an intent to preclude judicial review of FSLIC actions under the emergency provisions of the Garn Act. Section 123 of the Garn Act expressly amends the National Housing Act. By amending Section 408 of the National Housing Act with the emergency acquisition provisions, Congress made those provisions subject to Section 408. Moreover, nothing in Section 123 of the Garn Act expressly exempts actions authorized thereunder from judicial review pursuant to subsection (k). When Congress has stated an intention to amend a pre-existing act, this court will not lightly interpret that amendment to preclude the application of the terms of the amended act to the amending provisions. See Republic Steel Corp. v. Costle, 581 F.2d 1228, 1232 (6th Cir. 1978), cert. denied, 440 U.S. 909, 59 L. Ed. 2d 457, 99 S. Ct. 1219 (1979) (Amendments should be given "the most harmonious, comprehensive meaning possible," avoiding conflicts with the amended provisions.). We therefore hold that emergency acquisitions approved by the Bank Board and FSLIC pursuant to Section 123 of the Garn Act are subject to the review procedures of 12 U.S.C. § 1730a(k).

Because we determine that the acquisition is subject to review under Section 1730a(k), we must dismiss the petition with respect to the Bank Board. We agree with the conclusion reached by the Fifth Circuit in Fort Worth National Corp. v. FSLIC, 469 F.2d 47 (5th Cir. 1972), that Section 1730a(k) names only FSLIC, and not the Bank Board, as a proper party to an action seeking judicial review of an administrative decision by FSLIC. Id. at 54. The Petitioners have cited us no ...


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