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Senator GORTON. I'm sorry. Mr. Browning, could you answer that?

Mr. BROWNING. As you well know, this court ruling has recently come down. The Plus System has, however, narrowed its marketing efforts as a result of this decision until some clarity is brought to the issue. Therefore, our soliciation efforts for additional members has been inhibited.

Senator GORTON. In other words, you think you have lost business?

Mr. BROWNING. We certainly haven't solicited it.

Senator GORTON. Mrs. Cottrell, do you have concrete examples of instances in which the implementation or development of electronic fund transfer operations have been deferred or delayed because of the New York decision?

Mrs. COTTRELL. Let me say that the ATM network switch that has been set up in the State of Connecticut, which is where I'm from, started on July 9 of this year, long awaited since Connecticut was one of the last States that started this statewide switch. Of the nine banks that helped develop that switch, several of them are national banks. Certainly this decision, which in the second circuit court includes Connecticut, could have just disastrous effects on the ability of our ATM network switch to continue to operate.

Senator GORTON. Do you think that this makes it imperative that Congress act very promptly; that is to say, in this Congress as opposed to sometime next year?

Mrs. COTTRELL. Absolutely. I think we are at risk.

Senator GORTON. Mr. Elliott, what's your opinion of the alternative of S. 2898 suggested by Mr. Browning to the effect that national banks be able to participate in shared ATM's to the same degree as State-chartered banks in each State?

Mr. ELLIOTT. We would prefer that the bill proceed as it's currently worded. We feel that we don't want to confuse the issue and wish to keep the emphasis on the status quo. At another time, in a more appropriate forum, all the other issues can be surfaced.

Senator GORTON. Including those that you brought up?
Mr. ELLIOTT. Including those.
Senator GORTON. Senator Trible.

Senator TRIBLE. Mr. Chairman, really I do not have additional questions at this time. I appreciate the witnesses' testimony today and would simply make the observation that, Mr. Hamlin, I think you have set forth your point of view quite effectively. I must confess, as the author of this legislation, I am not persuaded by the force of your argument, but I'm sure you are not surprised by that.

You have indicated in very strong terms that the application of this decision is a very narrow one and you regard as nonsense the broader concerns that have been expressed by the community of interest that take part in these networks. We have heard really all the other parties, really have said that this networking system is at risk and that there is a very real economic impact on the further expansion and establishment of these systems and on the provision of services to the consuming public. Reasonable men and women can always disagree.

COURT DECISION JEOPARDIZES ATM'S FUTURE However, I must confess that as someone also trained in the law, as someone who once shaped at least a few district court decisions as a law clerk to a distinguished Federal district judge, and now as someone who makes law, I really am not at all persuaded that the application of this decision is so narrow. Indeed, I am convinced more so than ever after hearing from the witnesses today that this decision potentially places a great risk on the system of ATM's that is now providing an essential and important service to the consuming public.

Surely, the Congress should not respond to every district court decision, good or bad, and there are many very bad ones; but here we are talking about a district court decision that does, in my judgment, have application far beyond the Federal district court in which it was rendered. It has very obvious application potentially to the circuit and well beyond that and I'm not persuaded that the Congress has to wait and put people with substantial economic interest at risk and require that they are put through the wringer of extended litigation. And that is the reason for this legislative initiative and it will be up to my colleagues to judge it on its merits and determine whether action is important at this time or not. But I want to commend the job that you've done, and I mean that very sincerely. You have been outnumbered today, but you have set forth a point of view that's an important one and I think you've done that very effectively and I want you to know that I have read your statement and I've heard every word that you've said, as have my colleagues here today.

Mr. HAMLIN. Can I respond just briefly? I think we can do what we all want to do without going after some of those very essential policies that I've talked about earlier, by introducing the concept of the correspondent banking service. I would regard the interstate switching as a corresponding service, thus not branch operations. Many of the briefs before the second circuit have included that concept.

What that allows us to do is to permit interstate switching in virtually all the markets of New York that are worth anything to anybody, including New York City and principal cities upstate, would be permitted interstate ATM networks.

This case does not prohibit that. Our position does not prohibit that. It's not necessary. And as a person schooled in the law, we all know the technique of distorting a case to such point and then attack the distortion, and that's precisely what's been going on here today.

I would refer you to the actual language of the case and the outcome of the circuit court's decision. We are holding-maybe Congress can act by October 1-we're going to have the arguments on October 1.

Senator TRIBLE. Well, we appreciate your testimony and that of your colleagues in the financial services industry.

Senator GORTON. Thank you. I'm going to ask you one more question.

Mr. Browning, we're going to test you right now. If the only choice were the ABA language or nothing this year, how many of you witnesses would prefer nothing this year? Just raise your hands.

Mr. Hamlin. Nothing this year at all.

Senator GORTON. Let the record show that only Mr. Hamlin raised his hand. Mr. Browning did pretty well.

Other members of the committee and staff are also likely to have questions which they will submit to you in writing, and we appreciate your help. With that, thank you very much.

The meeting is adjourned.
[Whereupon, at 11:50 a.m., the hearing was adjourned.]
[Response to written questions from the committee follow:]

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E. D. "JACK" DUNN

Georgia
Secretary-Treasurer
SIDNEY A. BAILEY

Virginia
Past President

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By this letter I am responding to the questions regarding
state ATM law forwarded to CSBS by your letter of September
24, 1984. These responses are submitted on behalf of the
Conference of State Bank Supervisors, as an extension of
the testimony on s. 2898 presented on Wednesday, September
19, 1984. The responses contained herein are submitted
pending review by counsel for both the Conference and the
State of Delaware and shall not be considered exclusive or
binding as to any legal position which may be taken pursuant
to subsequent litigation. These responses are submitted in
good faith and are believed to be accurate given the best
information available to me at this time.

The questions submitted to me and my responses thereto are
as follows:

1. Can you account for which states would, in effect, disadvantage national banks at the expense of state banks, if Congress does nothing?

EXECUTIVE OFFICERS LAWRENCE E. KREIDER

Washington, DC Executive Vice President

Economist JOSEPH E. JONES Washington, D.C.

Vice President

Response: The laws of 20 states (Alabama, Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Massachusetts, Michigan, Minnesota, Montana, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Texas, Washington (until 7-1-85), West Virginia and Wisconsin) are more restrictive with respect to the location of "branches" within their borders than with respect to the use of shared automated teller machines (ATMs). (These figures are based upon a draft survey of state law done by CSBS staff and are believed to be accurate.)

However, CSBS does not believe that national banks should in fact be placed at any competitive disadvantage in these states. On the basis of the laws of these states, courts

1015 EIGHTEENTH STREET, N.W. • WASHINGTON, D.C. 20036 • (202) 296-2840

39-248 0-84--15

could, and in our opinion, should, treat more permissive ATM laws as exceptions to the McFadden Act, applicable to national banks as well as state banks. Of course, Congressional clarification as to the above status of state ATM laws may be helpful to the Office of the Comptroller of the Currency and to the courts. Therefore, CSBS would be happy to support an amendment so clarifying the McFadden Act.

The position of CSBS with respect to the incorporation of permissive state ATM laws by the McFadden Act is consistent with the position of the U.S. Court of Appeals for the D.C. Circuit in IBAA V. Smith, to wit:

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Since we hold that off-premises CBCT's
are "branches" within the meaning and
intent of section 36 (f)'s federal defi-
nition, for each CBCT a national bank
wishes to establish it must (1) file
a branch application with the Comp-
troller, (2) secure the Comptroller's
approval, and (3) satisfy the capital
and surplus requirements for branches
found in (a) sections 36 (d) and 51 of
the National Bank Act and (b) the
state banking statutes. Our holding,
however, does not mean that national
banks can not establish and operate
off-premises CBCT's in a state (e.g.,
Florida) that generally prohibits
branch banking when that state does
not define CBCT's as "branches" for
purposes of state law. Under section

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