Depository Institutions, Corporate Personhood, and the Federal Reserve: Striking a Balance in the Battle Between Public Good and Corporate Power

The notion that corporations are treated as persons under the confines of the Constitution is rooted in the beginnings of the nation.  Within the past decades, however, corporations viewed as citizens akin to human beings has generated a great deal of political and social scrutiny.  Many opponents regard the corporate entity as a massive engine of wealth that drowns out the voice of citizens; proponents argue that excessive governmental interference in the corporation encroaches upon constitutionally-recognized property rights, and therefore, individual rights.  While the debate often cuts across political party lines in popular opinion, a number of Supreme Court justices have formed strong views on the corporate personhood issue that do not necessarily follow a political bias.

One area of the economy not immune from the corporate personhood debate, especially following the financial crisis of 2008, is the banking industry.  In fact, the bailout of many high-profile financial institutions created a public backlash, renewing the debate with a greater sense of urgency.  Although legislation has been enacted to deal with the moral hazard, transparency, and accountability conditions of the financial industry as a whole, the fallout generated a number of lawsuits against the government, and against financial institutions.[1]  Now, the Federal Reserve’s activities are exposed to increased government input with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.[2]
The Federal Reserve Bank operates as a decision-making body within the economy, exercising discretion and supervision over most of the U.S. depository institutions. Among other responsibilities, the Federal Reserve provides “financial services to depository institutions, the U.S. government, and foreign official institutions.”[3]   Reconciling the rights of these depository institutions as corporations, against their obligations to the public, creates unique situations wherein the dual roles may conflict with each other.  Because the Federal Reserve must execute and enter into various financial agreements, transactions, and contracts with its member banks, it is therefore subject to lawsuits and its member banks enjoy corporate personhood rights under federal statutes.[4]
However, because they serve the public interest in preserving citizens’ household cash flow, depository institutions are corporations subject to extensive federal oversight and control being also regulated by the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA).[5]  They are distinct from “investment banks,” whose products range from mutual funds, securities, and annuities, to stocks, bonds and other investment products, all of which are not insurable by the FDIC.[6]  Through depository institutions, the Federal Reserve enacts national monetary policy by manipulating open market operations; reserve requirements; contractual clearing balances; and discount window lending among its member banks.[7]
National banks and depository institutions enjoying the benefits of corporate personhood are already curtailed by federal law compared to other types of corporations.  For example, under First National Bank of Boston v. Bellotti, banks are permitted to make political contributions, and in accordance with Citizens United v. FEC, corporations are allowed unlimited campaign spending from their general treasury funds.[8]  However, federal law does not allow Bellotti and Citizens United to apply where national banks and depository institutions are concerned.  The Federal Election Committee website states that national banks cannot make contributions from their treasuries, and that they “may not make contributions in connection with any election, including state and local,” but that contributions may be made from political action committees using “separately segregated funds” – even in light of the Citizens Unitedruling.[9]  
Because of the interconnectedness of investment institutions and banking, however, the parameters of certain institutions are difficult to define.  National banks, for example, are subject to regulations by the Office of the Comptroller of the Currency (OCC) by the National Bank Act, thereby excluding states from exercising supervisory or visitorial authority.[10]  Conversely, state-chartered regional banks and depository institutions are overseen by the state of operation, with the option of joining the Federal Reserve System.[11]  Any state-chartered banks that do not join the Federal Reserve System are regulated and supervised by the Federal Deposit Insurance Corporation (FDIC), the agency responsible for insuring banking deposits up to $250,000.[12]  This added protection thereby subjects state or national depository institutions to yet another layer of oversight and regulation.[13]
How the Federal Reserve operates both within and outside of its network of member banks  and institutions could provide insight into the full extent of the effect of corporate personhood upon the economy and the law.  For example, corporate personhood impacts more than just the contracts the Federal Reserve enters – it also affects its obligations to the public.  Interestingly, in Bloomberg, L.P. v. Bd. of Governors of the Fed. Reserve Sys., the Board of Governors argued that it did not need to disclose information under a Freedom of Information Act (FOIA) request since the Board “obtained information from the Federal Reserve Banks, and that Federal Reserve Banks are ‘persons.’”[14]  The Board of Governors sought to establish that the information it obtained fell within a financial exemption to a FOIA request as set forth in 5 U.S.C.A § 552(b)(4): “(1) the information for which the exemption is sought must be a trade secret or commercial or financial in character; (2) it must be obtained from a person; (3) and it must be privileged or confidential.”[15]
While the FOIA includes corporations in defining “persons,” the Court of Appeals did not explore whether the member banks constitute “persons” in accordance with 5 U.S.C. § 551(2), or “agencies.”[16]  Instead, the Court of Appeals determined that even when defining the Federal Reserve Banks as persons, the information requested by Bloomberg, L.P. did not meet the “privileged or confidential” standard, and therefore the Federal Reserve was not entitled to the exemption from disclosure under the FOIA.[17]
While the personhood of the banks did not ultimately affect the outcome of the Bloomberg, L.P. case, it is just one example of how far into the economic underpinnings of the nation the corporate personhood phenomenon actually reaches.

[*]Candace Lerario is a third year student at Rutgers School of Law-Camden and editor of the Rutgers Policy Blog.
[1]See  Frederic S. Mishkin, The Economics of Money, Banking, and Financial Markets 308-09 (4th ed. 1995); James E. Kelly, Transparency and Bank Supervision, 73 Alb. L. Rev. 421, 422-25 (2010); Nelson D. Schwartz, U.S. Is Set to Sue a Dozen Big Banks Over Mortgages, N.Y.   Times, Sept. 1, 2011, available at  mortgages.html?pagewanted=1&_r=1&nl=todaysheadlines&emc=tha2; Mark Pittman, Bloomberg Sues Fed to Force Disclosure ofCollateral, Bloomberg, Nov. 7, 2008, viewed Jan. 15, 2012).
[2] Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, H.R. 4173 (West, Westlaw through 2010).
[3]Id. at 1.
[4]See Trustees. of Dartmouth College v. Woodward, 17 U.S. 518 (1819); Louisville, C. & C.R. Co. v. Letson, 43 U.S. 497 (1844); Bloomberg, L.P. v. Bd. of Governors of the Fed. Reserve System, 601 F.3d 143 (2d Cir. 2010).
[5]See Federal Deposit Insurance Corporation Act, 12 U.S.C.A. §§§ 1811, 1814-15 (West, Westlaw through P.L. 112-39 approved 10-12-11); Fed. Reserve Bd., The Federal Reserve System: Purposes & Functions (Ninth Edition) (June 2005), available at  (last accessed___); U.S. Gov’tAccountability Ofc., Financial Regulation: Recent Crisis Reaffirms the Need to Overhaul the U.S. Regulatory System, 4 available at (last accessed Nov. 20, 2011).
[6] FDIC.Gov, Insured or not insured?,available at, (last visited Nov. 15, 2011).
[7] Fed. Reserve Bd., The Federal Reserve System: Purposes & Functions (Ninth Edition) (June 2005), available at (last accessed Aug. 16, 2012).
[8] Citizens United v. FEC, 130 U.S. 876 (2010); First Nat’l Bank of Boston v. Bellotti, 435 U.S. 765 (1978).
[9] Fed. Election Com’n, Contributions available at (last visited Nov. 21, 2011).
 [10] Watters v. Wachovia Bank, N.A., 550 U.S. 1 (2007); National Bank Act, 12 U.S.C.A §24, (West, Westlaw through P.L. 112-39 approved 10-12-11).
[11] FDIC.Gov, Who is the FDIC?,available at, (last visited Nov. 15, 2011).
 [13] Federal Deposit Insurance Corporation Act, 12 U.S.C.A. §§§ 1811, 1814-15 (West, Westlaw through P.L. 112-39 approved 10-12-11); FDIC.Gov, supra note 11.
 [14] Bloomberg, L.P. v. Bd. of Governors of the Fed. Reserve Sys., 601 F.3d 143 (2d Cir. 2010).
 [15]SeeId. at 146; Freedom of Information Act, 5 U.S.C.A § 552(b)(4) (West, Westlaw through P.L. 112-54 (excluding P.L. 112-40) approved 11-12-11).
 [16]Bloomberg, L.P, 601 F.3d at 147-48; 5 U.S.C.A. § 551(2) (West, Westlaw, through P.L. 112-54 (excluding P.L. 112-40) approved 11-12-11).
 [17]Bloomberg, L.P. 601 F.3d 143 at 147