KEITH R. FISHER* Orphan of Invention: Why the Gramm-Leach-Bliley Act Was Unnecessary e are taught since childhood the old proverb ªNecessity is Wthe mother of invention.º1 Perhaps so, where survival is at stake, or where commercial motivations create a premium for inventiveness. Motivations are quite different in the legislative arena, however, and ªnecessityº takes on a whole new meaning in political contexts. A frequently invoked principle of statutory construction is the judicial presumption that legislatures do not enact unnecessary statutes.2 The premise underlying this presumption is that legis- lative lucubrations must have some judicially discernible mean- ing, if only one looks hard enough or long enough to find it. At the same time, the concept of unnecessary legislation is scarcely unknown, though the frequency with which it is encountered in the legal literature depends upon how broad an interpretation of ªunnecessaryº one chooses. If, for example, one chooses to stretch the ªnecessityº point a bit, one could even say that the phenomenon of ªunnecessaryº legislation is fairly commonplace in a variety of constitutional law * Copyright 2001 by Keith R. Fisher. All Rights Reserved. Associate Professor of Law, Suffolk University Law School. The author wishes to express his apprecia- tion to Professors Michael P. Malloy, Helan A. Garten, Joseph A. Franco, Victoria J. Dodd, and also to Dennis J. Lehr, Esq., the doyen of the Washington, D.C. banking bar, for all their advice, encouragement, and helpful comments as this Article was in preparation. 1 For the politically correct, the phrase goes at least as far back as Roman times, and thus may be forgiven any lurking gender bias. Gender balance may be found in the existence of other parturition-oriented proverbs, such as, ªThe word is father to the deed.º 2 Hence, courts are loathe to construe a statute in a manner that would render some or all of its provisions superfluous or unnecessary. See, e.g., Ratzlaf v. United States, 510 U.S. 135, 141 (1994); Pa. Dep't of Pub. Welfare v. Davenport, 495 U.S. 552, 562 (1990). [1301] \\Server03\productn\O\ORE\80-4\ORE403.txt unknown Seq: 2 16-JUL-02 14:19 1302 OREGON LAW REVIEW [Vol. 80, 2001] contexts, where the doctrinal treatment of statutes subject to an ªintermediate scrutinyº standard of judicial review is to strike them down if their scope is ªbroader than necessaryº to serve a legitimate governmental interest.3 Even without stretching the point, however, it is not unusual to find opponents of a bill under consideration arguing that, for one reason or another, the legisla- tion is simply unnecessary.4 This Article argues that the Gramm-Leach-Bliley Act (GLEBA),5 was, in fact, unnecessary for the banking industry,6 3 E.g., Sec'y of State of Md. v. Joseph H. Munson Co., 467 U.S. 947, 967-68 (1984) (First Amendment); New York v. Ferber, 458 U.S. 747, 768 (1982) (First Amend- ment); United States Fid. & Guar. Co. v. McKeithen, 226 F.3d 412 (5th Cir. 2000) (Takings Clause). 4 For example, in 1949 the Department of Justice opposed legislation to resusci- tate the notion of contributory infringement by cutting back on judicial applications of the patent misuse doctrine. ªRepresented by John C. Stedman, Chief, Legislation and Clearance Section, Antitrust Division, the Department argued that legislation was unnecessary because the Mercoid decisions were correct, because they had not produced as much confusion as the proponents of the new legislation claimed, and because the legislation would produce new interpretive problems.º Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176, 208 (1980) (citing Hearings on H.R. 3866 Before Subcomm. No. 4 of the House Comm. on the Judiciary, 81st Cong. 50-56 (1949)). Similarly, the Justice Department opposed the McCarran-Ferguson Act on the ground that Parker v. Brown, 317 U.S. 341 (1943), made that legislation unneces- sary. See Cantor v. Detroit Edison Co., 428 U.S. 579, 609 (1976) (Blackmun, J., concurring). Somewhat more notorious were the Reconstruction Era arguments by certain members of Congress that the Fifteenth Amendment and enfranchising leg- islation were unnecessary because the Fourteenth Amendment already prohibited racial discrimination in voter qualifications. See Oregon v. Mitchell, 400 U.S. 112, 194-95 (1970) (Harlan, J., with Brennan, White, Marshall & Stewart, JJ., concurring in part and dissenting in part). 5 Gramm-Leach-Bliley Act (GLEBA), Pub. L. No. 106-102, 113 Stat. 1338 (1999). 6 Saying that a piece of legislation is ªunnecessaryº does not necessarily encom- pass an assessment of its wisdom as a matter of public policy. That assessment is beyond the modest scope of the present discussion. The wisdom or folly of GLEBA is best left as the subject of another article. Moreover, that GLEBA was unnecessary from the banking industry's point of view does not suggest that it was not desirable for other constituencies, including, in no particular order, (1) the Federal Reserve, which wished to be primus inter pares as a financial regulator, and which dearly wished to have the Comptroller of the Currency's operating subsidiary initiative, see discussion infra notes 273-93 and ac- companying text, curtailed; (2) the insurance industry, which wished to turn back the clock on gains by banks (principally national banks, with the aid of innovative OCC interpretations, as discussed in Part II, infra) in penetrating the insurance business; (3) the SEC, which finally succeeded in getting rid of the bank exemptions from the federal securities laws, see infra notes 459-74 and accompanying text; (4) Citigroup, which wished to legalize, post hoc, the merger of Citicorp and Travelers without having to unscramble the omelette a few years later with the divestitures that would have called into question the business sense of the original transaction (nonconform- ing operations conducted by Travelers that accounted for approximately twenty-five \\Server03\productn\O\ORE\80-4\ORE403.txt unknown Seq: 3 16-JUL-02 14:19 Orphan of Invention: Why the Gramm-Leach-Bliley Act Was Unnecessary 1303 because the so-called ªfinancial modernizationº wrought thereby was already available to the vast majority of commercial banking organizations7 without incurring the social costs that are invaria- bly the statutory ªprice tagº accompanying congressional grants of new powers to regulated industries. If necessity is the mother of invention, then that which is unnecessary is merely an un- wanted offspring, or, to coin a phrase parallel to (but the oppo- site of) the metaphor in the proverb, an ªorphan of invention.º GLEBA putatively lifted existing ªbarriersº to bank entry into the securities and insurance businesses. This Article will demon- strate that those barriers were illusory and that GLEBA is largely an orphan of the invention, responsive to the diversifica- tion needs of the banking industry, that had gone before. Two broad regulatory principles inform this analysis. The first is functional equivalence; the second is affiliation. Each of these represents a fundamental themeÐan Urlinie,8 to borrow an anal- ogy from music theoryÐfrom which basic tenets of financial ser- vices regulation unfold. The thesis of this Article is that application of these two princi- percent of its assets and forty percent of its revenues, see Travelers Group, Inc., 84 Fed. Res. Bull. 985, 988 (1998)); and (5) to some extent, the securities industry, which desired to change the one-way street of increased bank penetration of their business into a two-way street (and, though this was foiled at the last minute during the legislative process, the possibility of doing so through wholesale financial institu- tions that could avoid the more heavy-handed varieties of Federal Reserve holding company regulation, see Marc Selinger & Kenneth Talley, Financial Services Re- form: Wholesale Bank Provision Dropped From Financial Services Modernization Bill, BNA BANKING DAILY, Oct. 28, 1999). 7 In fact, the statute was only ªnecessaryº to justify, ex post, the 1998 merger of Citicorp and The Travelers Corporation to form Citigroup. See Travelers Group, Inc., 84 Fed. Res. Bull. at 988. To justify its gamble, Citigroup reportedly made a huge amount of political contributions and lobbying expenditures in Congress (esti- mated at about $300 million!). See, e.g., Robert Scheer, Robert Rubin's Great Good Fortune; Isn't the Former Treasury Secretary's Windfall at Citicorp a Wee Bit Fishy?, PITTSBURGH POST-GAZETTE, Mar. 23, 2000, at A21; Robert Scheer, We Sleep As Mammoths Gambol: Heavily Lobbied Bill Being Pushed Through This Week Will End Measures Put in Place in the Depression, L.A. TIMES, Nov. 2, 1999, at B9; Dean Anason, Advocates, Skeptics Face Off on Megadeals, AM. BANKER, Apr. 30, 1998, at 1-2 (quoting Rep. Maurice D. Hinchey as saying that Citigroup was ªessentially playing an expensive game of chicken with Congressº). 8 The term refers to an analytic concept developed by the famous German music theorist Heinrich Schenker to denote a ªfundamental lineº constituting a key ele- ment of the background level of musical composition (for tonal music, at least) from which Schenker postulated all such works are ªcomposed out.º For English lan- guage discussion of Schenker and his theories, see FELIX SALZER, STRUCTURAL HEARING: TONAL COHERENCE IN MUSIC (1952); ALLEN FORTE & STEVEN E. GIL- BERT, INTRODUCTION TO SCHENKERIAN ANALYSIS (1982). \\Server03\productn\O\ORE\80-4\ORE403.txt unknown Seq: 4 16-JUL-02 14:19 1304 OREGON LAW REVIEW [Vol. 80, 2001] ples