There is a fierce controversy being waged today about the status of the historic dual banking system in American law. National banks (banks chartered by the national government) derive their powers from federal law. States, on the other hand, assert that they should be able to control certain aspects of national bank operations such as consumer protection written as state law. While the national banks acknowledge that states do have certain areas where they may control national bank activities--much contract law, for example, which is essentially state law--the national banks also assert a high level of authority--preemption--over the states where both national and state law have application. States assert that the degree of preemption claimed by the national banks is excessive. Our paper makes the point that this conflict is almost inevitable, given the existence of national and state banks operating in the same areas. The point of the paper is that the controversy has nothing to do with the so-called dual banking system and calling upon the name of the system to support either national or state bank authority is misleading and adds nothing to the argument. The paper goes on, however, and asserts that, given recent changes in both national and state law, the dual banking system does not exist at all in any meaningful way and resort to it clouds rather than illuminates the underlying conflict. The authors believe that national and state banks are really no more different from one another than are two national (or two state) banks. Statutes like the Federal Deposit Insurance Corporation Improvement Act of 1991 and the state “blue sky” laws are discussed in this context.
Carl Felsenfeld and Genci Bilali,
Is There a Dual Banking System?,
2 J. Bus. Entrepreneurship & L.
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