-
https://clinton.presidentiallibraries.us/files/original/a104343bb45c3b62865ed421bc77274e.pdf
d179bcb43426de5a01d5eac3577f4fdb
PDF Text
Text
Withdrawal/Redaction Sheet
Clinton Library
DOCUMENT NO.
AND TYPE
DATE
SUBJECTffiTLE
RESTRICTION
GOPY
001. agreement
Agreement on Defense Cooperation between the United Arab Emirates
and the United States (14 pages)
10/08/1992
002. paper
re: Pan Am 103 (1 page)
n.d.
P1/b(1)
003. paper
re: Terrorist Incident Response (1 page)
n.d.
P1/b(1)
004. memo
re: Financial Activities (2 pages)
04/30/1993
P1/b(l)
005a. memo
re: Fed's Legal Authority to Deny Acquisitions (2 pages)
04/30/1993
P5
005b. memo
Virgil Mattingly to Alan Kreczko re: Authority of the Board (12
pages)
04/28/1993
P5
006. cable
re: Hizaballah Terrorist Tbreat (2 pages)
08/25/1992
p 1/b(1)
007. cable
re: No Final Decision (2 pages)
08/25/1992
P1/b(1)
008. cable
re: Comments (2 pages)
08/24/1992
P1/b(l)
009. paper
re: Assessment of the Terrorist Threat (4 pages)
08/14/1992
P1/b(l)
010. paper
re: Coordinating Sub-Group Agenda Items (9 pages)
11130/1992
Pl/b(l)
011. paper
re: Security Structures (11 pages)
02/08/1991
Pl/b(l), P5
l91 al
COLLECTION:
Clinton Presidential Records
National Security Council
Transnational Threats (Richard Clarke)
OA/Box Number: 3786
FOLDER TITLE:
Terrorism [3]
Kelly Hendren
2006-1164-F
kh832
RESTRICTION CODES
· Presidential Records Act- [44 U.S.C. 2204(a)]
Freedom of Information Act- [5 U.S.C. 552(b)]
Pl
P2
P3
P4
National Security Classified Information [(a)(l) of the PRA]
Relating to the appointment to Federal office [(a)(2) of the PRA)
Release would violate a Federal statute [(a)(J) of the PRA]
Release would disclose trade secrets or confidential commercial or
financial information [(a)(4) of the PRA]
PS Release would disclose confidential advice between the President
and his advisors, or between such advisors [a)(S) of the PRA)
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(a)(6) of the PRA]
C. Closed in accordance with restrictions contained in donor's deed
of gift.
PRM. Personal record misfile defined in accordance with 44
.
2201(3).
RR. Document will be reviewed upon request.
.
U.c·
b(l) National security classified information [(b)(l) of the FOIA)
b(2) Release would disclose internal personnel rules and practices of
an agency [(b)(2) of the FOIA)
b(J) Release would violate a Federal statute. [{b)(J) of the FOIA]
b(4) Release would disclose trade secrets or confidential or financial
information [(b)(4) of the FOIA]
b(6) Release would constitute a clearly unwarranted invasion of
personal privacy [{b)(6) ofthe FOIA)
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA)
b(8) Release would disclose information concerning the regulation of
financial institutions [(b){8) of the FOIA)
D~d disclose geological or geophysical information
er
wells [(b)(9) ofthe FOIA]
r
0
I
�(piD7
April 30, 1993
COPY
FROM:
ALAN KRECZKO
SUBJECT:
Fed's Legal Authority to Deny Acquisitions
Attached is the Federal Reserve's analysis of its authority to
deny acquisitions because the applicant engages in conduct
inconsistent with the national security of the United States.
Its main conclusions:
The legal standard is whether the publi~ benefits of the
proposed acquisition outweigh possible adverse effects.
o
These terms are followed in the statute by illustrative
examples, all of which are financial or economic in
nature and relate to the purposes of the statute to
prevent harm to competitors or consumers. This would
support a narrow reading of the factors relevant to the
balancing test.
o
Nevertheless, on balance, the language provides
sufficient leeway to include in the balancing test the
adverse effects on national security of strengthening a
company that engages in activity contrary to U.S.
security. This position would be strengthened if the
acquisition would directly enhance the capability of
the acquiror to act contrary to US natiorial security
interests.
While the Fed must ultimately do the balancing of benefits
and harms, it is not competent to assess the national
security .issues absent a decision "by the U.S. Government"
on such issues.
The Board is required to support its decisions with
"substantial evidence". The Fed questions whether the
current information meets that standard, particularly since
it may not be disclosable.
(However, Justice attorneys tell
me that there have been cases where benefits have been
denied on the basis of information not disclosable to the
applicant.) The litigation posture would be improved if the
Fed had an "adverse national security determination" by a
responsible government agency.
The other legal hook -- the integrity or competence of the
bank's management -- does not appear available in this case,
since it does not appear the bank's practices have deviated
from generally accepted standards.
COPY
�2
lid(;~}»~
The Fed lacks authority to terminate existing,
operations unless it can find a violation of law br unsound
practice in the U.S.
The Fed understands that the UK has broad discretion in
reviewing foreign bank applications, but does not.know
whether the UK has used that discretion in cases like this
one.
COMMENT
The Fed's analysis is fair, emphasizing the legal uncertainties
in the situation. While acknowledging the Bank Holding Act might
be used in this case, it makes clear that would require someone
else's national security determination. The Fed argues in any
event th~t "it is not clear the BHC Act is the appropriate
vehicle for making the determination".
I agree with the Fed's legal analysis.
I also agree with their
question about the desirability of relying on the BHC Act, even
if arguably available. Introducing the "national security"
assessment into the equation risks inconsistent and politicized
decisions by regulatory agencies on foreign acquisitions.
It may
be preferable to allow the Fed to assess the license application
on traditional banking factors, taking the CIA report into
account only to the extent it affects those factors (e.g. the
competence or integrity of the management).
If the acquisition
gives us national security concerns, Exon-Florio provides a
better vehicle for .addressing them.
COPY
�~----------------------------
(p\D8
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, 0. C. 20551
J.VIRG
COEY
GEN RAL COUNSEL
TO:
Alan Kreczko
FROM:
Virgil Mattingl~
DATE:
April 28, 1993
SUBJECT:
Authority of the Board under Section 4(c) (8} of the
Bank Holding Company Act of 1956
This memorandum discusses whether the Board has the
authority to deny an application under section 4(c) (8) of the
Barik Holding Company Act ("BHC Act") on the grounds that the
applicant engages in conduct that, although apparently not
illegal, may not be consistent with the national security
interests of the United States.l/
·
1.
SECTION 4(c) (8) OF THE BANK HOLDING COMPANY ACT
A.
Summary.
Section 4(c) (8) of the BHC Act requires Federal Reserve
Board approval before any bank holding company, or foreign bank
with U.S. banking activities, may acquire more than 5 percent of
the shares of a nonbank company engaged in activities in the
United States. The standard ·the Board must apply in determining
whether the acquisition is permissible is whether the activity of
the nonbank company is closely related to banking and whether the
public benefits of the proposal outweigh possible adverse
effects.
Our research has disclosed no foreign relations, trade
or other statute that would grant the Board independent authority
to deny an application under the BHC Act on grounds that a firm
has engaged in activities contrary to the U.S. national security.
In each of the relatively few statutes dealing with national
security interests, the statute itself, or its implementing
orders or regulations, sets forth a detailed scheme of operation
under the direction of the executive branch, which allows the
executive to take action to protect the national interest. None
of these detailed schemes of operation appears to create any
formal mechanism by which the Board could obtain either the
±/For purposes of this memorandum, it is assumed that the
applicant bank holding company is a foreign person but not a
foreign government.
COPY
�2
expert opinion of appropriate government officials or ~~~ 7
range of information that would be necessary to make c ~~J'J
determination in this area.
While section 4(c) (8) states that the Board must
consider whether "benefits to the public" outweigh "possible
adverse effects," it also directs the Board to conduct its
analysis and base its decision on whether the acquisition at
issue or the conduct of the proposed activity itself by the
holding company may be expected to produce public benefits or
adverse effects. This focus is consistent with the intent of the
statute that the Board not allow bank holding companies to expand
into nbnbanking activities that would result in unfair or
decreased competition, unsound banking practices or other adverse
effects.
In addition, the terms "benefits to the public" and
"possible adverse effects" are each followed by illustrative
examples. All of the examples are financial or economic in
nature and relate to the purposes of the statute to prevent harm
to competitors and consumers of financial services. This raises
the issue of whether the Board may consider benefits and adverse
effects that go beyond financial, economic or banking matters to
include general public policy considerations. The legislative
history of the statute is silent on whether the Board may take
into account generalized policy considerations such as the
national security. We can find no evidence in the statute, its
purpose or its legislative history that the BHC Act was designed
as a vehicle to adjudicate these types of national security
concerns. Moreover, unlike other provisions of the BHC Act,
section 4(c) (8) does not establish a mechanism that would allow
the Board to gather other expert opinion on the issue. For
example, with respect to acquisitions of banks, the Board is
required to provide notice of an acquisition to the Justice
Department's Antitrust Division in order that the competitive
effects of the proposal may be considered. There is no
comparable mechanism to allow the Board to obtain the necessary
input or advice on matters of public policy that go beyond
banking or economic considerations.
On the other hand, over the years, section 4(c) (8) has
been construed broadly. Approval of an application under section
4(c) (8) confers a license on a bank holding company to engage in
financial activities in the United States. If there was a
determination by appropriate government authorities that the
activities of an applicant were so contrary to the national
security of the United States as to constitute a threat, an
argument can be made under the language of section 4(c) (8) itself
that the Board, in considering whether to grant the license, may
consider that the matter constituting a threat to the national
security of the United States is an adverse effect, even if the
matter is not unlawful under the laws of the United States or the
COPY
�3
firm's home jurisdiction. There appears to be nothin ~· ~
section's legislative history that would indicate tha
t
~
that have been determined to affect adversely U.S. na i a .
security interests c~rtnot be taken into account by th
part of the balancing of public benefits and adverse effects. In
addition, to the extent the conduct of the company is contrary to
. generally accepted banking standards or practices, such conduct
would reflect adversely on rilanagerial integrity and competence
and could be taken into account under the managerial standard of
the Board's regulation implementing section 4(c) (8).
On balance, we believe that, if there has been a
determination by the appropriate authorities that the applicant
company has engaged in activities that threaten the national
security interests of the United States, there would be
sufficient leeway in the "public benefits" and "adverse effects"
balancing test of section 4(c) (8) to include all circumstances
related to a proposal that may produce adverse effects, such as
conferring a benefit on and strengthening the financial position
and capability of a company that engages in activities contrary
to the u.s. national security. This position would be
strengthened to the extent the firm to be acquired was engaged in
activities important to the u.s. financial system or its
acquisition would enhance the capability of the acquiror to act
contrary to the national security of the United States.
We also believe, however, that the Board does not have
unilateral discretion under the BHC Act to determine the U.S.
public interest in matters relating to national security
interests, including whether denial of an application under the
BHC Act is an appropriate response to a threat to such interests,
nor does the Board have the expertise, facilities or capabilities
to gather the information necessary to make such determinations
or conduct the required analysis and balancing of such complex
matters.
B.
Background.
Section 4 of.the Bank Holding Company Act ("BHC Act")
prohibits the acquisition by bank holding companies of the voting
shares of non-banking entities unless the acquisition is
specifically exempted. The International Banking Act of 1978
("IBA"), as amended, makes this provision applicable to foreign
banks as if they were bank holding companies.!:../ The principal
exemption to that prohibition is found in section 4(c) (8), which
permits the holding company to own:
shares of any company the activities of which the Board
after due notice and opportunity for a hearing has
~I
12 U.S.C.
§
3l06(a).
COPY
�4
determined (by order or regulation) to be s ~a~
related to banking or managing or controlli
:0 ·
to be a proper incident thereto . . . . In e e ining
whether a particular activity is a proper i
banking or managing or controlling banks the Board
shall consider whether its performance by an affiliate
of a holding company can reasonably be expected to
produce benefits to the public, such as greater
convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects,
such as undue concentration of resources, decreased or
unfair competition, conflicts of interest, or unsound
banking practices . . . .
,r.¥
12
u.s.c.
§
1843 (c) (8).
The determination made by the Board is interpreted as
involving two discrete elements.l/ First, the Board must
determine whether the non-banking activity in question is
"closely related" to banking. The types of activities the Board
has found to be permissible under this standard are financial
activities, including consumer and commercial financing, credit
card business, trust activities, leasing, securities brokerage
and limited securities underwriting and dealing activities, and
various forms of financial advice. For purposes of the instant
case, we are assuming the activity is "closely relatedi' to
banking and may be approved as long as the application meets the
second part of the test.
Second, the Board must determine whether the
performance of the·"closely related" activity at issue by the
holding company would result in "public benefits" that outweigh
"possible adverse effects." This second determination is made by
the Board upon individual consideration of the circumstances of
each applicant under section 4(c) (8). The purpose of the public
benefits test in section 4(c). (8} was to ensure that the entry by
bank holding companies into new areas of business would not
result in harm to financial markets or market participants and
their customers through, for example, unfair competition, undue
concentration of resources or unsound banking practices. In
other words, Congress intended that bank holding companies not be
ll See Securities Indus. Ass'n v. Board, 468 U.S. 207, 217- ·
18 (1984) ("Schwab"); NCNB Corp. v. Board, 599 F.2d 609, 610-11
(4th Cir. 1979); Ass'n of Bank Travel v. Board, 568 F.2d 549,
551-52 (7th Cir. 1978); Alabama Ass'n of Insurance Agents v.
Board, 533 F.2d 224, 235, 245-47 (5th Cir. 1976); National
Courier Ass'n v. Board, 170 U.S.App.D.C. 301, 304-05, 516 F.2d
1229, 1232-33 (1975); Independent Bankers Ass'n of Georgia v.
Board, 170 U.S.App.D.C. 278, 287-88, 516 F.2d 1206, 1215-16
(1975); Bank America v. Board, 491 F.2d 985, 988 (9th Cir. 1974).
COPY
�5
permitted to expand into nonbanking lines of b.usiness u~~~
Board concluded that the public would not be adversel' ~\Jf~gr
The Board has implemented this section in i~.~~--------~
Regulation Y, which restates the statutory test of public
benefits outweighing adverse effects and cites the examples
enumerated in the statute. Regulation Y also states that this
consideration of whether public benefits outweigh possible
adverse effects includes an evaluation of the financial and
managerial resources of the applicant, including its
subsidiaries. 12 C.F.R. § 225.24. It appears that the firm in
question has the financial capability and managerial competence
to engage in the proposed activity in a safe and sound manner.
We also have no information that the foreign firm is in violation
of any relevant law or regulation. If, however, the conduct of
the activities that may be contrary to the national security of
the United States deviates from generally accepted standards of.
banking practices, such conduct would reflect adversely on the
company's managerial competence and integrity and, on this basis,
may be taken into account under the Board's regulation
implementing section 4(c) (8).
C.
Discussion.
The question presented is whether, in the Board's
balancing of the public benefits of a proposal against possible
adverse effects, the standards under section 4(c) (8) of the BHC
Act are sufficiently broad to permit consideration of the fact
that an applicant foreign firm has lawfully engaged in activities
outside the United States that are contrary to the national
security of the United States.
There are two considerations. First, if the conduct of
the applicant that is contrary to the national security of the
United States can be determined to be unacceptable from a banking
or prudential point of view, this could reflect adversely on the
integrity and competence of the company's ·management, a relevant
consideration under section 4(c) (8) and the Board's implementing
regulation. In this case, it is not clear that the applicant's
management lacks integrity or competence or that it has deviated
from standards of banking or financial prudence because it has
chosen to take advantage of business opportunities that are
permitted under the laws of its home jurisdiction and other
jurisdictions in which it operates. Although the Board or the
U.S. government may disagree with the business ethic displayed,
it is not apparent that the management lacks the ability to
operate in conformance with U.S. requirements. In this regard,
until the U.S. government made certain actions illegal for U.S.
persons, at least according to press reports, some U.S. banks and
other firms apparently engaged in the same type of conduct the
applicant now engages in outside the United States and that is at
issue here.
COPY
�6
Second, if a determination was made by the c~m
e ent
authorities that the actions by the applicant arE
to the national security, section 4(c) (8) may, in our
, ~e
broad enough to encompass consideration by the Board = ~~a~~
finding in evaluating the public benefits and adverse effects of
the proposal. Because a threat to the national security of the
United States would constitute a kind of "possible adverse
effect[]" to the public, the language of the statute would seem
to authorize the Board to take these interests into account in
determining whether adverse effects of the proposal outweigh
public benefits. This conclusion would rest on the grounds that
granting the foreign firm a license to acquire the nonbank
company to conduct business in the United States contributes to
the foreign firm's financial strength, competitiveness, and
ability to deliver products to its customers. Approval of the
acquisition would result in adverse effects in the United States
because the firm's capacity to continue to engage in the
activities that are contrary to U.S. national security interests
would be enhanced.
D\_'
u.s.
Thus, the effects could be considered adverse effects
on the public under the standards of section 4(c) (8) and, if
severe enough, could warrant denial in the absence of any
countervailing benefits to the public. It should be noted,
however, that section 4(c) (8) establishes a balancing test, and
denial of the application could itself produce adverse
consequences to the U.S. -national interest that would need to be
taken irito account. As discussed below, it is not clear that the
Board has the capability to assemble and balance all of the
national security considerations and consequences regarding such
an action, nor is it clear that the Board and the BHC Act are the
appropriate vehicles for making the determination.
The conclusion that adverse effects resulting from
national security considerations may be considered under section
4(c) (8) would be even stronger to the extent the proposed
acquisition is of a company that is important to the United
States's firiancial system. In addition, the connection to the.
statutory factors would be clear in situations where the
application before the Board involved a request for approval of
an activity that could be used directly to support the conduct
that was determined to be contrary to the· U.S. national security.
In the instant case, the proposed activity does not appear to be
related to, or to be able to be used in furtherance of, the
applicant's conduct that is at issue.
On the other hand, it should be noted that the Board
has never had occasion to apply the public benefits test in such
a broad fashion. The cases considered by the Board have
generally included consideration of only the types of public
benefits and adverse effects enumerated in the statute and the
applicant's compliance with law. Moreover, a narrow reading of
COPY
�7
the scope of the public benefits test can be supportec ~~
language of section 4 (c) (8) which specifies that it h
performance by the applicant of the particular nonban~i
activity that is the subject of the application that~
u•u~~~~~~ue~--~
evaluated in balancing public benefits against adverse effects.
In other words, one could argue that the Board's consideration
under section 4(c) (8) is limited to an analysis of the particular
acquisition and its effects on the public interest and that
conduct of the applicant overseas unrelated to the proposed
acquisition or activity is not a relevant consideration.
nury
While there is significant legislative history on the
meaning of section 4(c) (8) in general and with respect to the
specific examples of adverse effects enumerated in the statute,
there is little guidance as to whether adverse effects unrelated
to banking or economic matters or compliance with law are to be
considered a proper part of that section's "public benefits"
test. There is nothing in the legislative history that
specifically would include a threat to national security or to
other non-economic national interests as a proper basis for
denying.a section 4(c) (8) application. There is also nothing in
the legislative history that specifically would exclude such
consideration.!/
In cases that have considered the public benefits test
under section 4(c) (8), courts have recognized that the list of
factors relating to benefits and adverse effects is not
exhaustive.~/ The cases, however, have not considered or
opined on the nature of other factors that may be taken into
account by the Board.
Principles of statutory construction can be used to
support a narrow reading of the public benefits test of section
4(c) (8). In this case, the question is whether a general term,
i.e, "possible adverse effects," is limited by reference to a
series of examples, all of which constitute a category, i.e.
i/The legislative history does contain a discussion of each
of the specific examples given in the "public benefits" test.
See H.R. Conf. Rep. No. 1747, 91st Cong., 2d Sess. 16-22 (1970).
~/
"Nonexhaustive examples of such benefits (greater
convenience, increased competition, and gains in efficiency) and
adverse effects (undue concentration of resources, decreased or
unfair competition, conflicts of interest, and unsound banking
practices) were listed by Congress in the statute." (emphasis
added) Alabama Ass'n of Ins. Agents v. Board, 533 F. 2d 224, 246
(5th Cir. 1976).
COPY
�8
"economic" or "banking" considerations.
n§_/
py
The princ I?. c~f
ejusdem generisii would have us attempt to reconcile
\5J
and general words, so that all words in a statute can be g1ven
effect, all words can be construed together and no wor s w1
e
superfluous. See Sutherland§ 47.17. For that reason, one might
argue that, from a strict statutory construction point of view,
section 4(c) (8) would not permit the denial of an application on
the grounds of national security that are not related to the
conduct of the particular activity for which approval is sought.
The common sense counter-argument to this ejusdem
generis argument is that when Congress enacted the 1970
amendments to section 4(c) (8), it was more concerned about
banking and economic effects than anything else, and therefore
mentioned them in the specific examples. If that was the case,
it would not be surprising if the legislative history were silent
as to whether other types of public interest considerations were
to be taken into account. It does not appear to be reasonable to
be able to deny an application because of localized competitive
effects and yet to be unable to deny an application if the
national security of the United States is threatened. On the
other hand, one could also argue that Congress could have assumed
that, if .particular activities of foreign firms were so ~nimical
to the U.S. national interest, the situation would be addressed
by other statutes, not by a banking statute administered by a
banking agency.
It appears to us that the chief difficulty in this case
is that it would be extremely difficult for the Federal Reserve
to make a reasoned assessment as to whether denial of this
application would be in the public interest in order to address
the potential harm to the national security occasioned by the
applicant's conduct overseas. A number of factors must be taken
into account and balanced in determining whether a firm from a
friendly country should be barred from conducting the proposed
activity in the U.S. market on the basis of national security
interests. The determination of what constitutes the "national
security interests" of the United States and how these interests
can be best protected is not a determination that the Board is
specifically authorized or has the expertise to make. These
kinds of decisions are generally committed to other arms of the
U.S. government. There is no clear definition of what may
constitute a threat to the national interests of the.United
£1 The examples could be read to encompass a more narrow
category than "economic considerations." For example, they could
be read to constitute only considerations of a "competitive or
prudential nature."
21 See Sutherland Stat. Canst.
("Sutherland") .
§
47.18 (5th ed. 1992)
COPY
�9
States and any definition may change with circumstancEs ~~
example, actions of a foreign company outside the Unit~
~
may·be contrary to stated U.S. government positions. ~ . .
executive branch, however, which has statutory author .~y ~u
prevent foreign acquisitions in the national interest, has rarely
prevented a foreign firm from entering and competing in the U.S.
market, even when the firm has acted contrary to the U.S.
national interest. In the case of Toshiba, which violated U.S.
law in a way that clearly threatened national .security, the
sanctions were limited in scope and duration.~/
There are also counter-arguments that denial of the
application would not be in the public interest because the firm
is a person of a country friendly to the United States, which
conducts substantial trade with the United States, with which the
united States has various trade and investment treaties, and in
which U.S. persons and firms have substantial economic interests
that could be vulnerable to retaliation by the foreign country.
Denial of the application, for other than prudential, financial
or other banking-related reasons, could have serious
repercussions bilaterally and in the context of the GATT talks.
_These reasons may suggest that the Board should appropriately
limit its review of applications under the BHC Act to
consideration of banking and economic factors.
Finally, the Board is required to support its decisions
with "substantial evidence.rr2/ The information available to
the Board at this point does not constitute substantial evidence
because, if challenged, the Board is not permitted to use such
information to support its decision in court. Even if the Board
were able to use the information, there is a serious question as
to whether a court would find that the Board had substantial
evidence on which to base a finding of adverse effects
outweighing public benefits, in the absence of a determination by
the responsible government agencies that the foreign firm's
activities were damaging to the national security and that denial
~/Toshiba Machine Company ("Toshiba Machine") and Kongsberg
Trading Company and certain of its affiliates ("Kongsberg") sold
technologically advanced milling machines and computer equipment
to the Soviet Union in violation of export controls promulgated
by the Coordinating Committee for Multilateral Export Controls.
The President imposed a three-year prohibition on (i) the
importation of all products produced by, and (ii) the procurement
of goods and services by the U.S. government from, Toshiba
Machine and Kongsberg. The sanctions did not extend to
affiliates of Toshiba Machine doing business in the U.S. See
Exec. Order No. 12661, 54 Fed. Reg. 779 (1988).
21
12
u.s.c.
§
1848.
COPY
�10
of the application is an appropriate response to the
national security.
D.
r~~Y
~~~
Conclusion.
Section 4(c) (8) is probably broad enough to allow a
wide range of factors to be taken into account in considering
whether a proposed acquisition will produce benefits to the
public that outweigh possible adverse effects. In this case,
however, the adverse effects are not clearly defined because
there has been no finding by the responsible authorities of the
U.S. government that the activities of the foreign firm in
question constitute a threat to the national security and that
denial of the application is an appropriate response to address
that threat.
It appears that, in order for the Board to take such
actions into account, there would need to be a decision by the
u.s. government that an action taken by a foreign firm adversely
affects the U.S. national security and that the firm taking such
action should not be permitted to take advantage of opportunities
in the U.S. market as a means to deal with the damage to the
national security. If there was no such decision by the U.S.
government and the Board was to deny an application based on
national security grounds, the Board would be in the position of
determining U.S. policy in this area, a responsibility that rests
elsewhere in the U.S. government.
2. OTHER FOREIGN BANK APPLICATIONS
The case-before the Board arises under section 4(c) (8)
of the BHC Act which deals with non-bank acquisitions and
activities. The Board also has many cases before it by foreign
banks to establish banking offices in the United States. The
standards governing these applications are different from the
test established under section 4(c) (8) of the BHC Act.
Under section 7 (d) of the International Banking Act of
1978, as amended ( "IBA"), 10 a foreign bank may not establish a
branch ih the United States without the prior approval of the
Board. 11 / In making its determination on an application, the
lO/
12.
u.s.c.
§
3105(d).
11/ The statute governs the establishment by a foreign bank
of a "branch," "agency" or "commercial lending company" in the
United States. A branch is an office that takes domestic
deposits and engages in other banking activities. An agency is
similar to a branch in all respects except that it cannot accept
domestic deposits. A commercial lending company is a state( continued ... )
COPY
�11
Board must find that the foreign bank is subject to s
by its home country authorities on a worldwide consol'
basis. The Board may also take into account a number
factors, including consideration of the needs of the
be served.
The standard under section 7(d) relating to the needs
of the community is probably broad enough to encompass many of
the same factors as the Board may consider under section 4 (c) (8)
of the BHC Act. Therefore, in acting on a branch application,
the Board could likely take into account as an adverse
consideration the fact that an appropriate government authority
has determined that the foreign bank engaged in activities
outside the United States contrary to the U.S. national security
and that, in response, the foreign bank should not be permitted
to expand in the United States.
With respect to the Board's ability to terminate the
existing U.S. operations of a foreign bank, under section 7(e) of
the IBA (12 U.S.C. § 3105(e)), the Board may require a foreign
bank to terminate the U.S. operations of a state-licensed branch
in two instances: (1) if the foreign bank is found not to be
subject to consolidated supervision by home country authorities;
or (2) there is reasonable cause to believe that the foreign bank
or an affiliate has committed a violation of law or engaged in an
unsafe or unsound banking practice in the United States and the
continued operation of the bank's branch in the United states
would not be consistent with the public interest or the purposes
of federal banking statutes (emphasis added) . 12 1 Thus, in
cases of termination, the Board must first find a basis for
believing that a violation of law or unsound practice has
occurred in the United States before it may consider the public
interest factors associated with terminating the branch's
operations.
3.
LAWS OF OTHER COUNTRIES
You also requested information on the kinds of
considerations other countries take into account in licensing
foreign banks to operate in their markets. The best information
we have is with respect to the United Kingdom.
ll/ ( ... continued)
chartered institution that exercises bank-like powers. For
purposes of this memorandum, the term "branch" is used to
encompass these other entities as well.
12 1
The Board may recommend to the Comptroller of the
Currency that the operations of federally-licensed branches or
agencies of a foreign bank be terminated, subject to the same
standards as apply to state-licensed offices.
COPY
�12
Under the Banking Act 1987, the Bank of Eng
authorize banks to take deposits. The Bank of Englan
consider a series of standards, including whether eve
controller or manager of the bank is a fit and proper~~~~~~
the position he holds. In making this determination, the Bank of
England may consider the previous conduct and activities in
business or financial matters of the person and in particular any
evidence that the person has:
committed any offense involving fraud or other
dishonesty or violence;
engaged in any business practices that appear to the
Bank of England to be deceitful or appressive (sic) or
otherwise improper (whether unlawful or not) or which
otherwise reflect discredit on his method of conducting
business;
engaged in or been associated with any other business
practices or otherwise conducted himself in such a way
as to cast doubts on his competence and soundness of
judgement.
Except for these factors, the other standards that must
be considered all appear to relate to financial factors rather
than general public policy concerns. Nevertheless, the Bank of
England has wide latitude to exercise its judgment. If an
application is denied, the applicant may appeal although we know
of no such appeal ever having been made. We also do- not know the
standard of review that would be applied.
COPY
�Withdrawal/Redaction Sheet
Clinton Library
DOCUMENT NO.
AND TYPE
SUBJECT!TITLE
DATE
RESTRICTION
0'1
001a. memo
Steven Simon and Alan Kreczko to Anthony Lake re: NSC Views on
the House Counterterrorism Bill (3 pages)
08/03/199
OOlb. memo
Alan Kreczko to Anthony Lake re: Foreign Sovereign Immunities Act
(4 pages)
07/14/1995
P5
001c. memo
Conrad Harper to The Secretary of State re: Anti-terrorism Bill (6
pages)
07/11/1995
P1/b(1)
001d. memo
Legislative Referral Memorandum #1870 [partial] (1 page)
06/30/1995
P3/b(3)
002. memo
Legislative Referral Memorandum #1180 [partial] (1 page)
05/03/1995
P3/b(3)
003. memo
Legislative Referral Memorandum #1131 [partial] (1 page)
04/28/1995
P3/b(3)
Co I \0
4.
COLLECTION:
Clinton Presidential Records
National Security Council
Transnational Threats (Richard Clarke)
OA/Box Number: 3547
FOLDER TITLE:
Terrorism- Money arid Counter-Terrorism Act [2]
Kelly Hendren
2006-1164-F
kh868
RESTRICTION CODES
Presidential Records Act- [44 U.S.C. 2204(a)]
Freedom of Information Act- [5 U.S.C. 552(b)]
Pl
P2
P3
P4
b(l) National security classified information [(b}(l) of the FOIA]
b(2) Release would disclose internal personnel rules and practices of
an agency [(b)(2) of the FOIA]
·
b(3) Release would violate a Federal statute [(b}(3) of the FOIA]
b(4) Release would disclose trade secrets or confidential or financial
information [(b)(4) of the FOIA]
b(6) Release would constitute a clearly unwarranted invasion of
personal privacy [(b}(6) of the FOIA]
b(7) Release would disclose information compiled for law enforcement ·
purposes [(b)(7) of the FOIA]
·
b(~) Release would disclose information concerning the regulation of
financial institutions [(b}(8) of the FOIA]
disclose geological or geophysical information
co•~e.,lling.Vells [(b}(9) of the FOIA].
National Security Classified Information [(a)(l) ofthe PRA]
Relating to the appointment to Federal office [(a)(2) of the PRA]
Release would violate a Federal statute [(a}(3} of the PRA]
Release would disclose trade secrets or confidential commercial or
financial information [(a)(4) of the PRA]
PS Release would disclose confidential advice between the President
and his advisors, or between such advisors [a)(S) of the PRA]
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(a)(6) of the PRA]
C. Closed in accordance with restrictions contained in donor's deed
of gift.
PRM. Personal record misfile defined in accordance with 44 U
2201(3).
RR. Document will be reviewed upon request.
�6013
NATIONAL SECURITY COUNCIL
WASHINGTON. D.C. 20506
August 3, 1995
ACTION
COPY
Natl ........ J"'\uv,sor
has seen
MEMORANDUM FOR ANTHONY LAKE
THROUGH:
RICHARD A. CLARKE
FROM:
b()\l
STEVEN SIMON~ flY.,
ALAN KRECZKO J\-'t
SUBJECT:
· NSC Views on the House Counterterrorism Bill
Issue for Decision
Whether to authorize Andy Sens to transmit to OMB the attached
statement of NSC views on the House version of the Comprehensive
Terrorism Prevention Act of 1995.
Background
The Senate has passed a counterterrorism bill; a version has also
been reported out of the House judiciary committee. OMB has
solicited comments on the House version (Tab C).
Notwithstanding the legislative movement to ~ate, the bill is in
some trouble. Conservatives and liberals have united in
opposition to some of the provisions. According to DOJ, Gingrich
has told Hyde not to bring it to the floor until he is certain he
has the votes to pass it quickly. Therefore, Hyde is likely to
hold the bill until he knows the Administration will support it
without significant floor fights. Ab Mikva thinks there is some
possibility that the House will simply let the bill drift, and
turn its attention instead to a crime bill.
Given the situation, DOJ thinks that while we can try to fix some
provisions quietly, we need to keep the floor fights to an
absolute minimum. At this point, DOJ believes that there are
only two items potentially worth a floor fight:
-- (1)failure to require that taggants be included in explosives
within a year or so.
-- (2)provisions amending the Foreign Sovereign Ii:nrnunities Act to
permit a wide array of suits against foreign states for torture,
terrorism and extrajudicial killing. However, DOJ -- which views
this as primarily a foreign policy issue -- would greatly prefer
COPY
�2
that the State Department (or we) find a way to convince
to drop this, as a floor fight will probably be a loser You are
familiar with this provision from Alan's previous mem 's (Tab B).
We need a clear decision that NSC opposes this provis·~~J)
some high-level work with Berman to get him to drop i . ~~o
fight would be virtually impossible to win) .
~
t~
While agreeing with DOJ on these two major issues, we think
are three other serious flaws in the House version.
Given the ~~" •
political pressure to produce counterterrorism legislation and .CIJ...~~.......,~
Justice's tendency to focus on procedural legal issues at the ~
expense of the broader policy implications of the bill, it is ~
important that NSC communicate its own views to OMB. In
~
highlighting these provisions, we are not necessarily saying t ey~
)
warrant a floor fight at this point; we simply want to identify
~
them to OMB and DOJ as important issues.
-.~.d
~.~
The draft statement of NSC views (Tab A) focuses on four
problematic sections:
~
Gf
4
•
The Bryant amendment, which would require prior public notice
of the designation of terrorist organizations. We are clearly
going to have to accept some judicial review of our
designations of terrorist organizations for which fund-raising
is prohibited. However, providing prior public notice and
comment would give groups a clear warning, enabling them to
disguise bank accounts, reconfigure or go underground before
law enforcement agencies can act.
•
The Frank amendment, which would subject to judicial review
the Secretary of State's determination that an applicant for
entry into the L!S. is excludable as a representative of a
terrorist organization. Visa decisions are not currently
reviewable. This new restriction to the existing authority of
consular agents and the Secretary of State would tie us in
litigation knots in situations where our priority is keeping a
potential terrorist out of the country.
•
The Berman amendment to the Foreign Society Immunity Act.
•
posse commitatus. ~Drafters in both the House and Senate have
tried to capture our objective in permitting a waiver of posse
commitatus restrictions during CBW attacks, while keeping the
role of the·military at a minimum. However, probably
inadvertently, the provisions adopted have serious flaws: (1)
they impose new procedural barriers to existing authority by
which the military can already provide assistance to U.S. law
enforcement ag~ncies in a CBW incident; and (2) they remove
some substantive authority (regarding searches) that the
COPY
�3
military already has to provide assistance in CBW incidents.
In our view, the little additional authority provi l~=>rl hv
Nunn's formula (limited seizure authority) is not ~h
the
steps backward in existing authority. DOJ and DOD o
·
~
levels agree. However, DOJ says the Nunn language w s
accepted at a political level in DOJ and can only 'e
JCU
with Nunn's concurrence. We're willing to make a run at Nunn,
but if he will not make changes, we are going to need to make
an awkward decision on whether it wouldn't be better to drop
the posse commitatus provisions altogether.
Finally, our statement to OMB would indicate our support for a
provision in the Senate, but not House version, permitting
limited counterterrorism assistance to any country,
notwithstanding any other provision of law. This narrowly
crafted provision would permit us to provide assistance to
Pakistan to assist in the apprehension of Kanzi. Our statement
would also indicate a provision needing some slight modification
to conform to our Refugee Convention obligations.
Concurrence by:
Bill
Danver~ fr\(
RECOMMENDATION
That you approve the transmittal to OMB of the attached statement
of NSC views on HR 1710.
Approve
~Disapprove
Attachments
Tab A
Statement of NSC Views
Tab B Memo from Alan Kreczko to Anthony Lake re FSIA
Tab C
Incoming Correspondence from OMB
COPY
�5378
NATIONAL SECURITY COUNCIL
WASHINGTON, D.C. 20506
July 14, 1995
COPY
ACTION
MEMORANDUM FOR ANTHONY LAKE
FROM:
ALAN KRECZKO ~~
SUBJECT:
Foreign Sovereign Immunities Act
We need guidance on three issues:
tactics; and fall-back.
position; congressional
Background
The Senate version of the terrorism bill includes a Dole- ·
sponsored provision which would permit Americans to sue States on
the terrorism list for acts of terrorism, torture, or
extrajudicial killing, in U.S. courts, and, to attach their
property here in execution of judgment.
The version reported out of the House Judiciary Committee
contains a Berman-sponsored provision which is substantially the
same, except that it applies to any state, not just States on the
terrorism list.
Each bill is retroactive as well as prospective.
Decisions
1. Position. The State Department has now informed OMB that it
opposes both the House and Senate versions of the bill. However,
State says it is getting ~ixed messages about the WH position.
We need your concurrence to reaffirm.our opposition to both
provisions.
Conrad Harper's analysis of the bills and their possible effects
is at Tab I. If anything, its "parade of horribles" is too
limited. For example, he doesn't include that the bill would
permit Vietnam vets to sue here for torture during the Vietnam
War, and to attach Vietnamese assets in satisfaction, and what
effect that might have on normalization of relations.
·
In assessing the bill, it is important to recognize that default
judgments are likely to be the rule. The assertion of
jurisdiction in the bills is unprecedented; foreign states are
COPY
�2
jurisdiction in the bills is unprecedented; foreign states are
not going to show up in U.S. courts to have the reasonableness of
their officials' acts judged. This raises the possi 1 1 y o
jury awards against foreign states that we do not be ~O.DV
responsible for terrorist acts (e.g., against Syria ~~
103), undermining our effort to hold the real perpet~~~------~
responsible and complicating our relations with the party found
responsible. Moreover, such suits will proceed on the basis of
partial information, since we will not release our most sensitive
intelligence information for a civil suit.
Finally, the bill could have serious reciprocity implications for
us: e.g., USG sued in Mexican courts by family of a Mexican shot
crossing the U.S.-Mexican border.
These considerations have led past Administrations (Republican)
to oppose legislation along the lines of that proposed by Berman.
We should oppose also.
2. Congressional TaGtics. State intends to approach Berman to
see if he will drop the provision. It is also possible-that HIRC
will seek sequential referral of this item, because of its
foreign policy implications.
However, if these approaches fail, the issue may become whether
to seek a floor vote. Hyde may cooperate; he made clear he was
uneasy with the Berman provision, although he allowed it to be
voted out of committee.
State says the WH has told it no floor votes, given the
President's interest in moving the terrorism bill. We think this
is a midread of WH Legislative instructions~ which were only to
avoid marginal floor votes.
3. Fall-back. Given apparent congressional sentiment, we may
not succeed in getting the Berman and Dole provisions struck
altogether. We need at a minimum to get back to the Senate
version, which at least is limited to terrorist-supporting
States. We should also seek (1) to cut it back to only acts of
terrorism (not extrajudicial killing and torture, which are not
.as well-defined) and (2) to add a sunset clause. Even such a
limited bill would be problematic, however.
State is considering that our first offer (assuming efforts to
delete the provisions altogether fail) should be to accept a
provision which is limited to suits for aircraft sabotage
directed against U.S. aircraft. Their logic is two-fold:
( 1) ·
the Senate provision is driven by Pan Am 103; there is no chance
of getting the provision removed without offering the families a
remedy for Pan Am 103; and (2) there is at least some basis to
COPY
�3
law already permits Americans to sue foreign States for torts
committed in the United States; it is a relatively small ste to
add torts committed against U.S. airplanes.)
p{:~Jl)k:
In our view, this is the wrong offer. If we can not
securing deletion of the provisions altogether, we w~~~~~~~
instead that Congress authorize us to vest blocked Libyans assets
here and distribute them to those families of the victims who
seek compensation now. In our view, this is preferable to
establishing a new right to sue foreign States in our courts,
even if limited to acts of aircraft sabotage:
Creating a right to sue is tantamount to a decision to turn
Libyan assets over to the families, since we assume some
family members will sue, and easily prevail in U.S. courts
in establishing Libyan complicity.
a right to sue carries with it the risk of suits
against Iran or Syria for Pan Am 103. Vesting Libyan
property through a statute, rather than opening up the
possibility of court action, is consistent with the view
that the Executive branch is better positioned than the
courts, which will have only partial information, to
determine who was responsible for Pan Am 103.
Creatin~
Does not set the precedent of turning over to the courts
issues with such serious potential foreign policy
implications.
If the Executive branch is not doing enough to assert the rights
of Americans, we should do more, but we should not turn that
aspect of our foreign pol~cy over to another branch of
government.
-
Concurrence by:
___..!75
";)C3;.
Mort Halperin, Mike Andricos, Rand Beers, and
David Satterfield
(!,~;:)!>
RECOMMENDATION
1. That you agree that we should oppose both the House and
Senate versions, and that we can inform both Justice and OMB that
this is a major problem in the terrorism bill.
Approve
Disapprove
2. That, subject to coordination with Pat Griffin, we inform
State we do not oppose a floor vote if necessary to get a
satisfactory outcome on this provision.
Approve
Disapprove
COPY
�4
3. That our first counteroffer be to vest blocked. Libyan assets
in the U.S. and make them available to interested fan l.Lles or tn1
victims of Pan Am 103.
CQPY
Approve
Disapprove
Attachments
Tab I
Conrad Harper's Analysis
COPY
�
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Previously Restricted Documents
Date
A point or period of time associated with an event in the lifecycle of the resource
1993-2001
Description
An account of the resource
<p>This collection contains documents that were previously restricted under the <a href="http://www.archives.gov/presidential-libraries/laws/1978-act.html" target="_blank">Presidential Records Act</a> for restrictions P2 (appointment to federal office) and/or P5 (confidential advice between the President and/or his advisors and between those advisors). For more information concerning these collections please see the collection finding aids index. The finding aids detail the scope, content, and provide a box and folder title list for each collection.</p>
<p>The <a href="http://www.archives.gov/presidential-libraries/laws/1978-act.html" target="_blank">Presidential Records Act (PRA)</a> includes provisions that these types of documents be withheld for twelve years after the end of a president's administration. These documents are now being made available to the public. The documents will be released in batches and will be uploaded here as they become available. The documents will also be available in the Clinton Library’s research room.</p>
<p>Please note the documents in this collection may not contain all the withheld documents listed on the collection's withdrawal sheet index.</p>
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Extent
The size or duration of the resource.
397 folders
Text
A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text.
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
FOIA 2006-1164-F - Terrorism
Identifier
An unambiguous reference to the resource within a given context
2006-1164-F
Is Part Of
A related resource in which the described resource is physically or logically included.
Previously Restricted Document Release no. 5
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Medium
The material or physical carrier of the resource.
Reproduction-Reference