Tom C. Clark

“ Justice Matthews declared for a unanimous Court that the purpose of the Congress in passing the provision was 'to prohibit the States from imposing such a burden as would prevent the capital of individuals from freely seeking investment in institutions which it was the express object of the law to establish and promote.' At page 154 of 121 U.S., at page 835 of 7 S.Ct. The Court further held deposits in savings banks to be moneyed capital but approved their total exemption from state taxes, along with other enumerated property, on the ground that the State had shown 'just reason' so to do. ”

“ That authorization is qualified by a proviso that a state tax on national bank shares shall not be 'at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State coming into competition with the business of national banks.' We have assumed, without deciding, that the national banks located in Michigan and savings and loan associations there are in competition in a substantial phase of the business carried on by national banks, i.e., residential mortgage loans. ”

“ Furthermore, the power of the State to grant liberal tax treatment to its own associations, viewed even without the light of congressional action, is amply supported by the exemption doctrine of Mercantile Bank, supra, recognized as still vital long after Michigan's law of 1887 under which the savings and loan associations of that State are organized. ”

“ They may make loans only on first mortgage real estate notes and can neither carry on a banking business nor received deposits [6] Their reserves must equal 10% of liabilities to their members and the associations' surplus is limited to 5% of assets. [7] Earnings above the permitted reserves and surplus must be paid to members currently and at stated periods. The Congress authorized the organization of federal savings and loan associations in 1933 in the Home Owners' .loan Act, 48 Stat. ”

“ This term was first enlarged in 1927 to five years [11] and then to 10 years in 1935 by 49 Stat. 706, which also authorized an increase to 60% as the maximum proportion of property value permitted to be loaned. In 1934, national banks were authorized to purchase F.H.A. guaranteed mortgages. ”