## Facts

- Wachovia Bank, N.A. was a national bank regulated by the Office of the Comptroller of the Currency (OCC) under the National Bank Act (NBA).
- The NBA authorizes national banks to engage in real-estate lending and to exercise incidental powers necessary to conduct banking.
- OCC regulations permit national banks to conduct bank-permitted activities through “operating subsidiaries,” which are subject to the same terms and conditions as the parent bank.
- Wachovia Mortgage Corporation was a state-chartered, wholly owned operating subsidiary of Wachovia Bank, licensed by the OCC, and engaged in mortgage lending in Michigan.
- Michigan exempted banks from its mortgage-lending registration regime but required bank subsidiaries to register with the state regulator and submit to state supervision and examination.
- Wachovia Mortgage surrendered its Michigan registration after becoming an OCC-licensed operating subsidiary; the Michigan commissioner threatened to bar it from mortgage lending unless it complied with state registration and oversight.
- Wachovia and its subsidiary sought declaratory and injunctive relief in federal court, asserting NBA and OCC preemption; the state commissioner argued the subsidiary was not a national bank and raised a Tenth Amendment objection.

## Issues

1. Whether the NBA and valid OCC regulations preempt Michigan’s registration, examination, and supervisory requirements as applied to a national bank’s OCC-licensed operating subsidiary engaged in mortgage lending.
2. Whether the NBA’s restriction on state “visitorial powers” bars state examination and supervisory authority over an operating subsidiary conducting bank-permitted activities.
3. Whether OCC’s assertion of exclusive supervisory authority in this setting violates the Tenth Amendment.

## Decision

- The Supreme Court affirmed the Sixth Circuit in a 5–3 decision authored by Justice Ginsburg.
- The Court held that the NBA and OCC regulations preempt Michigan’s registration and supervisory scheme as applied to Wachovia’s operating subsidiary.
- The Court held that state examination and supervision of the operating subsidiary constituted prohibited visitorial powers reserved to the OCC, subject to limited exceptions for court-based enforcement.
- The Court rejected the Tenth Amendment challenge.

## Legal Principles

- When an OCC-licensed operating subsidiary conducts activities the national bank itself may conduct, those activities are treated as the bank’s activities for purposes of NBA preemption.
- State laws that significantly interfere with a national bank’s exercise of federally authorized powers are preempted; state licensing, registration, and supervisory oversight of bank-permitted lending conducted through an operating subsidiary can qualify as such interference.
- NBA visitorial-powers limits bar state examination, inspection of books and records, and supervisory control over national banks and covered bank-permitted activities conducted through their operating subsidiaries, absent express congressional authorization.
- National banks and their operating subsidiaries remain subject to generally applicable, nonpreempted state laws (e.g., contract, property, and tort) so long as those laws do not significantly interfere with federally granted banking powers.

## Conclusion

The Court held that Michigan could not require a national bank’s OCC-licensed operating subsidiary to register or submit to state examination and supervision for mortgage lending, because the NBA and OCC regulations preempted that oversight and reserved visitorial authority to the OCC, without violating the Tenth Amendment.


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