United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 15, 2002 Decided November 15, 2002

No. 01-5280

Wells Fargo Bank, N.A.,
Appellant

v.

Federal Deposit Insurance Corporation,
Appellee

Appeal from the United States District Court
for the District of Columbia
(No. 00cv01251)

Mary E. Hennessy, pro hac vice, argued the cause for
appellant. With her on the briefs was Gloria B. Solomon.
Joel G. Chefitz entered an appearance.

Lawrence H. Richmond, Counsel, FDIC, argued the cause
for appellee. With him on the brief was Colleen J. Boles,
Senior Counsel. Ann S. DuRoss, Assistant General Counsel,
entered an appearance.


Before: Edwards, Randolph and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Tatel, Circuit Judge: In this case, we must decide whether
Federal Deposit Insurance Act requirements applicable to
banks that acquire savings associations continue to apply
when such banks are in turn acquired by other banks. The
Federal Deposit Insurance Corporation, which is charged
with enforcement of the statute, concluded that these "second
generation" transactions are subject to the Act's restrictions.
The district court agreed. Because we find the statute
ambiguous on this issue and the FDIC's interpretation consis-
tent with congressional purpose, we affirm.

I.

Following widespread failures of savings and loan associa-
tions in the 1980s, Congress restructured the federal deposi-
tory insurance system in the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989. Pub. L. No. 101-73,
103 Stat. 183 (codified as amended in scattered sections of 12
U.S.C.). Known as FIRREA, the Act abolished the insolvent
Federal Savings and Loan Insurance Corporation and shifted
its responsibilities to the Federal Deposit Insurance Corpora-
tion. The Act also created an independent Bank Insurance
Fund (known as BIF) to cover deposits of commercial banks
and a Savings Association Insurance Fund (known as SAIF)
to cover deposits of savings and loan associations. SAIF's
premiums were significantly higher than BIF's because SAIF
needed to build reserves and to cover additional thrift fail-
ures.

Because Congress worried that SAIF's capitalization could
be jeopardized if healthy savings associations, in order to take
advantage of BIF's lower premiums, converted to banks or
transferred their deposits to banks, FIRREA also amended
the Federal Deposit Insurance Act to impose entrance and
exit fees on so-called conversion transactions that effectively
transfer deposits between BIF members and SAIF members.
12 U.S.C. s 1815(d)(2)(B), (E), (F). FIRREA also imposed a


five-year moratorium (later extended to 1996) on such trans-
actions. Id. s 1815(d)(2)(A)(ii).

One of the few exceptions to the moratorium and fees is
contained in the so-called Oakar Amendment, which allows
certain mergers and deposit transfers as long as participants
obtain regulatory approval and the acquiring institutions con-
tinue paying proportional assessments to BIF and SAIF. Id.
s 1815(d)(3). If the acquiring bank is a BIF-insured institu-
tion (an "Oakar bank"), for instance, it pays BIF assessments
on its original deposits and SAIF assessments on the "adjust-
ed attributable deposit amount" (AADA)--the proportion of
deposits obtained from savings associations, adjusted for sub-
sequent growth. Id. s 1815(d)(3)(B)(i). The Oakar bank's
AADA premiums are deposited in SAIF, and SAIF bears a
proportional share of any costs incurred by the FDIC if the
bank later fails. Id. s 1815(d)(3)(D)(i), (G).

In 1990, the FDIC issued an advisory opinion--the Rankin
Letter--explaining how it would treat situations in which an
Oakar bank merges with or is acquired by a normal BIF
member. FDIC Advisory Op. No. 90-22 (June 15, 1990).
Although nothing in FIRREA explicitly addresses this ques-
tion, the FDIC said that it would consider such "second-
generation" or "downstream" purchases to be conversion
transactions. Accordingly, the acquiring BIF member would
be subject either to the moratorium and fee provisions or to
the Oakar Amendment's proportional assessments rule. The
FDIC later reaffirmed this position in a December 1996
rulemaking. 12 C.F.R. s 327.37; 61 Fed. Reg. 64,960,
64,962-64 (Dec. 10, 1996).

In April 1996, after the issuance of the Rankin Letter but
before the 1996 regulations, appellant Wells Fargo, a BIF
member, acquired and merged with First Interstate Bancorp
and seven of its subsidiaries, including three Oakar banks
that had acquired savings association deposits in prior trans-
actions. Over the next several years, the FDIC assessed
SAIF premiums on a portion of Wells Fargo's new deposits.

Arguing that its purchase of the Oakar banks was not a
conversion transaction, Wells Fargo filed suit in the United


States District Court for the District of Columbia seeking a
$23 million refund of SAIF premiums and other charges that
it had paid because a portion of its deposits were treated as
being insured by SAIF. The district court, applying Chev-
ron's two-part analysis, Chevron U.S.A. Inc. v. Natural Res.
Def. Council, Inc., 467 U.S. 837, 842-43 (1984), found the
statute silent as to the treatment of transactions between
Oakar banks and normal BIF members and the FDIC's
interpretation both reasonable and consistent with congres-
sional intent. Wells Fargo Bank, N.A., v. FDIC, No.
00-1251, slip op. at 7, 9-12 (D.D.C. June 15, 2001). The court
therefore granted the FDIC's motion to dismiss for failure to
state a claim upon which relief can be granted. Id. at 12.
Our review is de novo. Cummings v. Dep't of the Navy, 279
F.3d 1051, 1053 (D.C. Cir. 2002).

II.

We start our analysis, as always, by asking whether Con-
gress has spoken to "the precise question at issue." Chevron,
467 U.S. at 842. If it has, both we and the agency must give
effect to Congress's unambiguously expressed intent. Id. at
842-43. Because the judiciary functions as the final authority
on issues of statutory construction, "[a]n agency is given no
deference at all on the question whether a statute is ambigu-
ous." Cajun Elec. Power Coop., Inc. v. FERC, 924 F.2d 1132,
1136 (D.C. Cir. 1991); see also SBC Communications Inc. v.
FCC, 138 F.3d 410, 418 (D.C. Cir. 1998) (stating that a court
must determine whether a statute is ambiguous on its own,
without regard to an agency's reasoning). We consider the
provisions at issue in context, using traditional tools of statu-
tory construction and legislative history. Nat'l Rifle Ass'n of
Am., Inc. v. Reno, 216 F.3d 122, 127 (D.C. Cir. 2000).

Under the Federal Deposit Insurance Act as amended by
FIRREA, mergers or consolidations between two financial
institutions are "conversion transactions" only if they involve
a "Bank Insurance Fund member" on one side and a "Savings
Association Insurance Fund member" on the other. 12
U.S.C. s 1815(d)(2)(B)(ii). The Act then defines these two


terms: A "Bank Insurance Fund member" is "any depository
institution the deposits of which are insured by the [BIF],"
and a "Savings Association Insurance Fund member" is "any
depository institution the deposits of which are insured by the
[SAIF]." Id. s 1817(l)(4), (5). Wells Fargo, a BIF member,
argues that the statute unambiguously says that Oakar banks
(like the ones it acquired) are also BIF members and there-
fore that its acquisitions were not "conversion transactions."
Disagreeing, the FDIC insists that Oakar banks must be
treated as SAIF members for purposes of second generation
transactions because financial institutions would otherwise be
able to evade both proportional Oakar assessments and en-
trance and exit fees by transferring savings association de-
posits first to an Oakar bank and then to a normal BIF
member.

We disagree with Wells Fargo that the statute is unambig-
uous with respect to "the precise question at issue": whether
Oakar banks should be considered SAIF members for pur-
poses of regulating downstream transactions. Not only has
Wells Fargo identified nothing in either the statute or its
legislative history suggesting that Congress even considered
this issue, but section 1817(l)'s definitions do not prohibit
institutions from being members of both funds simultaneous-
ly. According to Wells Fargo, section 1817(l) implicitly
forbids dual membership because it used mutually exclusive
terms to determine institutions' fund membership at the time
of enactment, id. s 1817(l)(3); see also id. s 1817(l)(1), (2)
(establishing mutually exclusive membership rules for newly
established financial institutions), but this argument ignores
the fact that the Oakar Amendment explicitly allows institu-
tions to take on a hybrid status after engaging in a conversion
transaction with a member of the other fund. Id.
s 1815(d)(3).

Moreover, nothing in the Oakar Amendment unambiguous-
ly resolves the issue of fund membership. Wells Fargo
emphasizes that the Amendment states that an Oakar bank's
AADA "shall be treated as deposits which are insured by the
Savings Association Insurance Fund" for purposes of assess-
ment, id. s 1815(d)(3)(B)(i) (emphasis added), not that its


deposits actually are insured by SAIF. Yet the Act never
defines the difference between being "treated as" and actually
"insured by" SAIF, nor specifies whether such treatment
should continue if an Oakar bank's AADA is transferred to
another institution. Indeed, the statute appears to make no
meaningful distinction between Oakar banks' relationships
with BIF and SAIF. Such banks are "treated as" SAIF
members for purposes of assessment since they must pay
SAIF rates on their AADAs and since those premiums must
be deposited in SAIF. Id. s 1815(d)(3)(D)(i). The statute
also treats them as SAIF members for purposes of loss
allocation. Although Wells Fargo argues that another provi-
sion of the Federal Deposit Insurance Act indicates that BIF
should make all initial payments to depositors in the event
that an Oakar bank fails, id. s 1821(f)(1), SAIF must absorb
the losses attributable to the bank's AADA if the institution's
assets are insufficient to cover all FDIC payouts, id.
s 1815(d)(3)(G).

Wells Fargo points to section 1815(d)(3)(E)(ii), which states
that the Oakar Amendment "shall not be construed as autho-
rizing transactions which result in the transfer of any insured
depository institution's Federal deposit insurance from 1 Fed-
eral deposit insurance fund to the other Federal deposit
insurance fund." Wells Fargo interprets this language to
mean that a BIF member that acquires a savings association
remains exclusively a BIF member, but we think it not so
clear. The new financial institution that results from such a
merger is in fact a hybrid, treated as a savings association
with respect to its AADA and as a bank with respect to its
original deposits. For core purposes of assessment and loss
allocation, the Oakar Amendment mandates that the hybrid
still be treated as a member of SAIF after the Oakar
transaction, a result that comports with section
1815(d)(3)(E)(ii)'s statement that the institution's deposit in-
surance does not transfer between funds. Indeed, the
Amendment specifically provides that Oakar banks may end
their obligations to SAIF by paying the entrance and exit
fees to transfer their AADAs to BIF after the moratorium's
expiration. Id. s 1815(d)(3)(H).


Finally, FIRREA's legislative history is equally ambiguous
on the membership status of Oakar banks. Although Wells
Fargo emphasized at oral argument that the Senate's original
version of the bill would have defined SAIF members as
including "any other financial institution that is required to
pay assessments into the [SAIF]," S. 774, 101st Cong.
s 208(l)(4) (1989), that language could not have been intended
to refer to Oakar banks because it was drafted before the
Oakar Amendment was even proposed. The conference com-
mittee reports do not discuss why committee members did
not adopt the Senate's membership definition nor what they
thought about the fund membership of Oakar banks, H.R.
Rep. No. 101-222, at 394-96 (1989); H.R. Rep. No. 101-209, at
396-98 (1989), but Amendment sponsor Rep. Mary Rose
Oakar stated clearly that the hybrid institutions "will [still] be
subject to the moratorium restrictions, the exit and entrance
fee requirements and will not have left the SAIF system for
purposes of the thrift acquired." 135 Cong. Rec. 18,556
(1989).

On balance, then, we think the Oakar Amendment is ambig-
uous on two counts: as to whether a hybrid Oakar bank is a
"depository institution the deposits of which are insured by
the Savings Association Insurance Fund" to the extent of its
AADA, 12 U.S.C. s 1817(l)(5), and as to whether its adjusted
attributable deposit amount should still be "treated as" in-
sured by SAIF for purposes of assessment after a down-
stream transaction with another BIF member, id.
s 1815(d)(3)(B)(i). Both of our sister circuits that have con-
sidered the issue agree that the statutory scheme is ambigu-
ous. As the Eleventh Circuit explained

Under the statute, a BIF Oakar institution holds some
funds that are in every meaningful way and effect in-
sured by the SAIF, and it holds other funds that are in
every meaningful way and effect insured by the BIF.
The statute defines an SAIF member institution as one
whose funds "are insured by the [SAIF]," id.
s 1817(l)(5), and it defines a BIF member institution as
an institution whose funds "are insured by the [BIF]," id.


s 1817(l)(4). Under these provisions and definitions, an
Oakar institution can be a 'member' of both funds. Thus,
there is an ambiguity in the statute.

Bank of Am., N.A., v. FDIC, 244 F.3d 1309, 1317 (11th Cir.
2001); see also Branch Banking & Trust Co. v. FDIC, 172
F.3d 317, 326-27 (4th Cir. 1999) (finding a conflict between
the requirement that the AADA merely be treated as insured
by SAIF and the Oakar Amendment's prohibition on trans-
fers between funds).

III.

We next consider the FDIC's interpretation of the statute.
Although both parties assume that Chevron's second step
governs this case, we doubt whether the FDIC is entitled to
Chevron deference because, although it had issued the Rankin
Letter at the time Wells Fargo acquired the three Oakar
banks, it had not yet exercised its formal rulemaking authori-
ty--the 1996 regulation. See United States v. Mead Corp.,
533 U.S. 218, 229-34 (2001); Am. Fed'n of Gov't Employees v.
Veneman, 284 F.3d 125, 129 (D.C. Cir. 2002) (agency action
not intended to have force of law is not entitled to Chevron
deference). At the very least, however, because the FDIC is
charged with administering this highly detailed regulatory
scheme, we may resort to its "body of experience and in-
formed judgment" for guidance to the extent that its position
is persuasive. Skidmore v. Swift & Co., 323 U.S. 134, 140
(1944).

Congress restricted conversion transactions for an obvious
reason: It wanted to ensure that assessments on savings
association deposits would keep flowing into SAIF so that the
fund would be properly capitalized. See, e.g., H.R. Rep. No.
101-54, Pt. 1, at 411-12 (1989) ("The Committee believes that
this moratorium is necessary ... to provide for a stable and
increased premium income to reduce the amount of taxpayer
funds ultimately needed to resolve the crisis."). The Oakar
Amendment not only furthered this goal, but also encouraged
healthy banks to acquire ailing savings associations by ensur-
ing that acquiring institutions unwilling to pay the steep


entrance and exit fees to transfer deposits directly out of
SAIF could instead accept a hybrid status and ongoing SAIF
assessments. See 135 Cong. Rec. 18,556 (1989) (statement of
Rep. Oakar) (Oakar banks "will not have left the SAIF
system for purposes of the thrift acquired"); see also 12
U.S.C. s 1815(d)(3)(H) (requiring Oakar institutions to pay
entrance and exit fees after the expiration of the moratorium
to end their obligations to pay proportional assessments).

As the FDIC pointed out in both its 1996 rulemaking and
brief in this case, Wells Fargo's interpretation would frus-
trate Congress's stated purpose and would render the statu-
tory scheme largely meaningless since institutions could
evade the entrance and exit fee payments and the continuing
obligation to pay proportional assessments by structuring
conversion transactions as two-step transfers--from a savings
association to an Oakar bank and then to a normal BIF
member. In contrast, the FDIC's interpretation "implements
Congressional intent because it prevents financial institutions
from manipulating the system at SAIF's expense. It is also
consistent with the Oakar Amendment's requirement that an
Oakar bank's deposits retain their original fund affiliation."
Appellee's Br. at 31. Thus, treating downstream mergers
between Oakar banks and normal BIF members as conver-
sion transactions is a reasonable--if not the most reason-
able--interpretation of the statute. See Bank of Am., N.A.,
244 F.3d at 1322; Branch Banking & Trust, 172 F.3d at 328-
29.

Wells Fargo makes three challenges to the reasonableness
of the FDIC's interpretation. It argues that the agency's
position is unwarranted because the facts alleged in the
bank's complaint show that this merger did not involve a bad-
faith attempt to evade SAIF assessments, amounts to a post
hoc rationalization adopted for purposes of litigation, and
conflicts with prior agency interpretations. None of these
arguments is persuasive.

Congress was concerned with the effect of conversion
transactions on SAIF's capitalization, not the parties' good or
bad faith. Also, since 1990, the FDIC has held firm to its


interpretation that second-generation transactions should be
treated as conversion transactions. Industry members' ques-
tioning of this interpretation at the time that the FDIC
confirmed its earlier position in a formal rulemaking does not
negate the fact that the agency made a considered decision on
the issue. Otherwise, any rulemaking adopted in the face of
comments challenging an agency's statutory interpretation
would have to be discounted as a post hoc rationalization
adopted in anticipation of potential litigation by disgruntled
commenters.

In support of its claim that the FDIC's position in this case
conflicts with earlier statements, Wells Fargo points to a 1995
opinion letter in which the agency concluded that an Oakar
bank was not a formal member of SAIF for purposes of
certain secondary statutes that levy additional charges
against SAIF members. FDIC Gen. Counsel Op. No. 7, 60
Fed. Reg. 7055 (Feb. 6, 1995). But that opinion did not deal
with the issue this case raises--whether Oakar banks should
be treated as members of SAIF for purposes of downstream
transactions. Wells Fargo lists a parade of horribles that it
believes would occur if Oakar banks were deemed SAIF
members for all purposes, but that is the import of neither
the Rankin Letter nor the 1996 rulemaking. Instead, both
treat Oakar banks as SAIF members only with regard to
second-generation transactions. Given the unique hybrid na-
ture of Oakar banks, we think it not at all unreasonable for
the FDIC to conclude that they should be treated as SAIF
members for purposes related to loss allocation and premium
assessments, but not for others.

Because the most reasonable interpretation of sections
1815(d)(3) and 1817(l) treats Oakar banks as SAIF members
during subsequent conversion transactions, we affirm.

So ordered.