author: Mr. Justice White Mr. Justice Stewart, Mr. Justice Stevens,

text:
    CORBITT v. NEW JERSEY
    No. 77-5903.
    Argued October 3, 1978
    Decided December 11, 1978

      White, J., delivered the opinion of the Court, in which Burger, C. J., and BlacemuN, Powell, and Rehnquist, JJ., joined. Stewart, J., filed an opinion concurring in the judgment, post, p. 226. Stevens, J., filed a dissenting opinion, in which Brennan and Marshall, JJ., joined, .post, p. 228.

      James K. Smith, Jr., argued the cause for appellant. With him on the brief was Stanley C. Van Ness.

      John DeCicco, Deputy Attorney General of New Jersey, argued the cause for appellee. With him on the brief were
      John J. Degnan, Attorney General, David S. Baime, Assistant Attorney General, and Anthony J. Porrillo, Deputy Attorney General.
   Mr. Justice White

delivered the opinion of the Court.

Under the New Jersey homicide statutes, some murders are of the first degree; the rest are of the second degree. Juries rendering guilty murder verdicts are to designate whether the murder was a first- or second-degree crime. The mandatory punishment, to be imposed by the judge, for those convicted by a jury of first-degree murder is life imprisonment; second-degree murder is punished by a term of not more than 30 years. Trials to the court in murder cases are not permitted, and guilty pleas to murder indictments are forbidden. Pleas of non vult or nolo contendere, however, are allowed. “If such plea be accepted,” the punishment “shall be either imprisonment for life or the same as that imposed upon a conviction of murder in the second degree.” The judge entertaining the plea determines that there is a factual basis for conviction but need not decide whether the murder is first or second degree.

Appellant Corbitt, after pleading not guilty to a murder indictment, was convicted of committing murder in the course of an arson — a felony murder and one of the first-degree homicides. He was sentenced to the mandatory punishment of life imprisonment. His conviction and sentence were affirmed by the New Jersey appellate courts. The New Jersey Supreme Court rejected his contention that because defendants pleading non vult could be sentenced to a lesser term, the mandatory life sentence following a first-degree murder verdict was an unconstitutional burden upon his right to a jury trial under the Sixth and Fourteenth Amendments and upon his right against compelled self-incrimination under the Fifth and Fourteenth Amendments, as well as a violation of his right to equal protection of the laws under the Fourteenth Amendment. 74 N. J. 379, 378 A. 2d 235 (1977). We noted probable jurisdiction. 434 U. S. 1060 (1978).

Appellant's principal reliance is upon United States v. Jackson, 390 U. S. 570 (1968). There, this Court held that the death sentence provided by the Federal Kidnaping Act was invalid because it could be imposed only upon the recommendation of a jury accompanying a guilty verdict, whereas the maximum penalty for those tried to the court after waiving a jury and for those pleading guilty was life imprisonment. Only those insisting on a jury trial faced the possibility of a death penalty. These provisions were held to be a needless encouragement to plead guilty or to waive a jury trial, and the death penalty was consequently declared unconstitutional.

We agree with the New Jersey Supreme Court that there are substantial differences between this case and Jackson, and that Jackson does not require a reversal of Corbitt’s conviction. The principal difference is that the pressures to forgo trial and to plead to the charge in this case are not what they were in Jackson. First, the death penalty, which is “unique in its severity and irrevocability,” Gregg v. Georgia, 428 U. S. 153, 187 (1976), is not involved here. Although we need not agree with the New Jersey court that the Jackson rationale is limited to those cases where a plea avoids any possibility of the death penalty’s being imposed, it is a material fact that under the New Jersey law the maximum penalty for murder is life imprisonment, not death. Furthermore, in Jackson, any risk of suffering the maximum penalty could be avoided by pleading guilty. Here, although the punishment when a jury finds a defendant guilty of first-degree murder is life imprisonment, the risk of that punishment is not completely avoided by pleading non vult because the judge accepting the plea has the authority to impose a life term. New Jersey does not reserve the maximum punishment for murder for those who insist on a jury trial.

It is nevertheless true that while life imprisonment is the mandatory punishment for a defendant against whom a jury has returned a first-degree murder verdict, a judge accepting a non vult plea does not classify the murder and may impose either life imprisonment or a term of up to 30 years. The defendant who wishes to avoid the certainty of life imprisonment if he is tried and found guilty by the jury of first-degree murder, may seek to do so by tendering a non vult plea. Although there is no assurance that he will be so favored, the judge does have the power to accept the plea and to sentence him to a lesser term. It is Corbitt’s submission that the possibility of a sentence of less than life upon the plea of non vult, combined with the absence of a similar possibility when found guilty by a jury, is an unconstitutional burden on his federal rights under the Fifth, Sixth, and Fourteenth Amendments.

As did the New Jersey Supreme Court, we disagree. The cases in this Court since Jackson have clearly established that not every burden on the exercise of a constitutional right, and not every pressure or encouragement to waive such a right, is invalid. Specifically, there is no per se rule against encouraging guilty pleas. We have squarely held that a State may encourage a guilty plea by offering substantial benefits in return for the plea. The plea may obtain for the defendant “the possibility or certainty . . . [not only of] a lesser penalty than the sentence that could be imposed after a trial and a verdict of guilty . . . Brady v. United States, 397 U. S. 742, 751 (1970), but also of a lesser penalty than that required to be imposed after a guilty verdict by a jury. In Bordenkircher v. Hayes, 434 U. S. 357 (1978), the defendant went to trial on an indictment charging him as a habitual criminal, for which the mandatory punishment was life imprisonment. The prosecutor, however, had been willing to accept a plea of guilty to a lesser charge carrying a shorter sentence. The defendant chose to go to trial, was convicted, and was sentenced to life. We affirmed the conviction, holding that the State, through the prosecutor, had not violated the Constitution since it “no more than openly presented the defendant with the unpleasant alternatives of forgoing trial or facing charges on which he was plainly subject to prosecution.” Id., at 365. Relying upon and quoting from Chaffin v. Stynchcombe, 412 U. S. 17 (1973), we also said:

“While confronting a defendant with the risk of more severe punishment clearly may have a ‘discouraging effect on the defendant’s assertion of his trial rights, the imposition of these difficult choices [is] an inevitable’ — and permissible — ‘attribute of any legitimate system which tolerates and encourages the negotiation of pleas.’ Chaffin v. Stynchcombe, supra, at 31. It follows that, by tolerating and encouraging the negotiation of pleas, this Court has necessarily accepted as constitutionally legitimate the simple reality that the prosecutor’s interest at the bargaining table is to persuade the defendant to forgo his right to plead not guilty.” 434 U. S., at 364.

There is no difference of constitutional significance between Bordenkircher and this case. There, as here, the defendant went to trial on an indictment that included a count carrying a mandatory life term under the applicable state statutes. There, as here, the defendant could have sought to counter the mandatory penalty by tendering a plea. In Bordenkircher, as permitted by state law, the prosecutor was willing to forgo the habitual criminal count if there was a plea, in which event the mandatory sentence would have been avoided. Here, the state law empowered the judge to impose a lesser term either in connection with a plea bargain or otherwise. In both cases, the defendant gave up the possibility of leniency if he went to trial and was convicted on the count carrying the mandatory penalty. In Bordenkircher, the probability or certainty of leniency in return for a plea did not invalidate the mandatory penalty imposed after a jury trial. It should not do so here, where there was no assurance that a plea would be accepted if tendered and, if it had been, no assurance that a sentence less than life would be imposed. Those matters rested ultimately in the discretion of the judge, perhaps substantially influenced by the prosecutor and the plea-bargaining process permitted by New Jersey law.

Bordenkircher, like other cases here, unequivocally recognized the State’s legitimate interest in encouraging the entry of guilty pleas and in facilitating plea bargaining, a process mutually beneficial to both the defendant and the State. In pursuit of this interest, New Jersey has provided that the judge may, but need not, accept pleas of non vult and that he may impose life or the specified term of years. This not only provides for discretion in the trial judge but also sets the limits within which plea bargaining on punishment may take place. The New Jersey Supreme Court observed that the “encouragement of guilty defendants not to contest their guilt is at the very heart of an effective plea negotiation program.” 74 N. J., at 396, 378 A. 2d, at 243-244. Its conclusion was that in this light there were substantial benefits to the State in providing the opportunity for lesser punishment and that the statutory pattern could not be deemed a needless or arbitrary burden on the defendant’s constitutional rights within the meaning of United States v. Jackson.

We are in essential agreement with the New Jersey Supreme Court. Had Corbitt tendered a plea and had it been accepted and a term of years less than life imposed, this would simply have recognized the fact that there had been a plea and that in sentencing it is constitutionally permissible to take that fact into account. The States and the Federal Government are free to abolish guilty pleas and plea bargaining; but absent such action, as the Constitution has been construed in our cases, it is not forbidden to extend a proper degree of leniency in return for guilty pleas. New Jersey has done no more than that.

We discern no element of retaliation or vindictiveness against Corbitt for going to trial. There is no suggestion that he was subjected to unwarranted charges. Nor does this record indicate that he was being punished for exercising a constitutional right. Indeed, insofar as this record reveals, Corbitt may have tendered a plea and it was refused. There is no doubt that those homicide defendants who are willing to plead non vult may be treated more leniently than those who go to trial, but withholding the possibility of leniency from the latter cannot be equated with impermissible punishment as long as our cases sustaining plea bargaining remain undisturbed. Those cases, as we have said, unequivocally recognize the constitutional propriety of extending leniency in exchange for a plea of guilty and of not extending leniency to those who have not demonstrated those attributes on which leniency is based.

Finally, we are unconvinced that the New Jersey statutory pattern exerts such a powerful influence to coerce inaccurate pleas non vult that it should be deemed constitutionally suspect. There is no suggestion here that Corbitt was not well counseled or that he misunderstood the choices that were placed before him. Here, as in Bordenkircher, the State did not trespass on the defendant’s rights “so long as the accused [was] free to accept or reject” the choice presented to him by the State, 434 U. S., at 363, that is, to go to trial and face the risk of life imprisonment or to seek acceptance of a non vult plea and the imposition of the lesser penalty authorized by law.

Appellant also argues that the sentencing scheme infringes his right to equal protection under the Fourteenth Amendment because it penalizes the exercise of a “fundamental right.” We rejected a similar argument in North Carolina v. Pearce, 395 U. S. 711 (1969), noting that “[t]o fit the problem . . . into an equal protection framework is a task too Procrustean to be rationally accomplished.” Id., at 723. All New Jersey defendants are given the same choice. Those electing to contest their guilt face a certainty of life imprisonment if convicted of first-degree murder; but they may be acquitted instead or, in a proper case, may be convicted of a lesser degree of homicide and receive a sentence of less than life. Furthermore, a plea of non vult may itself result in a life sentence. The result, therefore,

“may depend upon a particular combination of infinite variables peculiar to each individual trial. It simply cannot be said that a state has invidiously 'classified' . . .
Id., at 722.

It cannot be said that defendants found guilty by a jury are "penalized” for exercising the right to a jury trial any more than defendants who plead guilty are penalized because they give up the chance of acquittal at trial. In each instance, the defendant faces a multitude of possible outcomes and freely makes his choice. Equal protection does not free those who made a bad assessment of risks or a bad choice from the consequences of their decision. The judgment of the Supreme Court of New Jersey is affirmed.

It is so ordered.

Mr. Justice Stewart,

concurring in the judgment.

I agree with the Court that United States v. Jackson, 390 U. S. 570, is not controlling in this case. In the Jackson case, a convicted defendant could be sentenced to death if he had requested a jury trial but could be sentenced to no more than a life sentence if he either had pleaded guilty or had pleaded not guilty and waived a jury trial. Under these circumstances, the Court held that this part of the federal statute was unconstitutional because it “impose [d] an impermissible burden upon the exercise of a constitutional right.” Id., at 572.

Under the New Jersey statutory scheme, by contrast, no such impermissible burden is present. Unlike the statute at issue in the Jackson case, the death penalty is not involved here, and a convicted defendant can be sentenced to the maximum penalty of life imprisonment whether he pleads non vult or goes to trial. Moreover, although in New Jersey a defendant pleads non vult to a general indictment of murder, he can be sentenced to the maximum sentence even though the underlying facts would have supported no more than a second-degree murder conviction if the defendant had gone to trial and been found guilty by a jury. Since the latter offense cannot be punished by life imprisonment, a defendant who is guilty of second-degree murder is subject to a greater penalty if he pleads non vult than if he pleads not guilty and is convicted of that offense after a jury trial. Finally, a defendant who pleads not guilty and goes to trial can be convicted of a lesser included offense or acquitted even though in fact he is guilty of first- or second-degree murder or manslaughter. It is, therefore, impossible to state with any confidence that the New Jersey statute does in fact penalize a defendant’s decision to plead not guilty.

I cannot agree with the statement of the Court, however, that “[tjhere is no difference of constitutional significance between Bordenkircher and this case.” Ante, at 221. Bordenkircher v. Hayes, 434 U. S. 357, involved plea negotiations between the attorney for the prosecution and the attorney for the defense in the context of an adversary system of criminal justice. It seems to me that there is a vast difference between the settlement of litigation through negotiation between counsel for the parties, and a state statute such as is involved in the present case. While a prosecuting attorney, acting as an advocate, necessarily must be able to settle an adversary criminal lawsuit through plea bargaining with his adversary, a state legislature has a quite different function to perform. Could a state legislature provide that the penalty for every criminal offense to which a defendant pleads guilty is to be one-half the penalty to be imposed upon a defendant convicted of the same offense after a not-guilty plea? I would suppose that such legislation would be clearly unconstitutional under United States v. Jackson. Since the reasoning of part of the Court's opinion suggests otherwise, I concur only in the judgment.

Mr. Justice Stevens,

with whom Mr. Justice Brennan and Mr. Justice Marshall join, dissenting.

The concept of a “false” not-guilty plea has no place in our jurisprudence. A defendant has a constitutional right to require the State to support its accusation with evidence. He is therefore given an unqualified right — before trial when he retains the presumption of innocence — to plead not guilty. Because the entry of such a plea cannot at once be criminally punishable and constitutionally protected, a statute that has no other purpose or effect than to penalize assertion of the right not to plead guilty is “patently unconstitutional.” The Court so held in United States v. Jackson, 390 U. S. 570, 581, and that holding is dispositive of this case.

Today, however, the Court decides that a defendant who has been convicted after a full trial may be punished not only for the crime charged in the indictment but additionally for entering a “false” plea of not guilty. The holding in Jackson, though not specifically overruled, has been divorced from the rationale on which it rested.

New Jersey does not seriously contend that § 2A: 113-3 has any purpose or effect other than to penalize assertion of the right not to plead guilty. Its argument that the statute is justified by a valid state interest in conserving scarce prosecu-torial resources is simply a restatement of the obvious purpose of the law to motivate defendants to plead guilty instead of exercising their expensive right to trial. If appellee is correct in its assertion that the statute has been effective as a money-saving inducement to guilty pleas, that success is necessarily attributable to the deterrent effect of the penalty imposed on those who resist the inducement.

In its attempt to distinguish Jackson, the State argues that its statute imposes no penalty for “falsely” pleading not guilty because it provides the same maximum punishment regardless of the plea. That argument is beside the point because the statute provides a significantly more severe standard of punishment for the defendant who exercises his constitutional rights than for the one who submits without trial. For the former, a mandatory life sentence is prescribed • whereas for the latter, life is “only the maximum in a discretionary spectrum of length” that extends downward anywhere from a term of 30 years to no term at all. Dobbert v. Florida, 432 U. S. 282, 300. Whether viewed in light of the legislative purpose in enacting the statute or in light of its impact on the defendant’s choice of how to plead, this difference in punitive standards has the same “onerous” effect as if the maximum, as well as the minimum, penalty differed. Just as in Jackson, the statute subjects the defendant who stands trial to a substantial risk of greater punishment than the defendant who pleads guilty.

Nor is this statutory scheme the equivalent of a plea bargain negotiated between defense counsel and the prosecutor. While such bargains serve a state interest in common with §2A: 113-3, they do so without penalizing the defendant’s assertion of his legal rights. In the bargaining process, individual factors relevant to the particular case may be considered by the prosecutor in charging and by the trial judge in sentencing, regardless of the defendant’s plea; the process does not mandate a different standard of punishment depending solely on whether or not a plea is entered.

Of even greater importance is the fact that a defendant who refuses a plea bargain will not be punished for his constitutionally protected recalcitrance; whatever punishment he receives will be for his conduct in committing the offense or offenses the State has proved at trial. In contrast, a defendant who faces a more severe range of statutory penalties simply because he has insisted on a trial, is subjected to punishment not only for the crime the State has proved but also for the “offense” of entering a “false” not-guilty plea.

Because the legislature, the voice of the community in identifying crimes and penalties, has inflexibly engraved the different standard of punishment in the statute itself, New Jersey may not disavow or disparage its policy of imposing a special punishment simply because a person has done what the law plainly allows him to do. As the Court reiterated last Term, the implementation of such a policy inevitably produces a due process violation of the most basic sort.

The right of the defendant to stand absolutely mute before the bar of justice and to force the government to make its case without his aid has been accepted since the earliest days of the Republic. That silence, and its formal invocation by entry of a not-guilty plea, cannot retain the protection of the Fifth Amendment and be simultaneously a punishable offense. The same act cannot be both lawful and unlawful. That is the essence of the Court's holding in Jackson. I respectfully dissent from its repudiation.

       The relevant statutes are N. J. Stat. Ann. §§2A:113-1 to 2A:113-4 (West 1969 and Supp. 1978-1979):
      “2A: 113-1. Murder
      “If any person, in committing or attempting to commit arson, burglary, kidnapping, rape, robbery, sodomy or any unlawful act against the peace of this state, of which the probable consequences may be bloodshed, kills another, or if the death of anyone ensues from the committing or attempting to commit any such crime or act; or if any person kills a judge, magistrate, sheriff, constable or other officer of justice, either civil or criminal, of this State, or a marshal or other officer of justice, either civil or criminal, of the United States, in the execution of his office or duty, or kills any of his assistants, whether specially called to his aid or not, endeavoring to preserve the peace or apprehend a criminal, knowing the authority of such assistant, or kills a private person endeavoring to suppress an affray, or to apprehend a criminal, knowing the intention with which such private person interposes, then such person so killing is guilty of murder.
      “2A: 113-2. Degrees of murder; designation in verdict
      “Murder which is perpetrated by means of poison, or by lying in wait, or by any other kind of willful, deliberate and premeditated killing, or which is committed in perpetrating or attempting to perpetrate arson, burglary, kidnapping, rape, robbery or sodomy, or which is perpetrated in the course or for the purpose of resisting, avoiding or preventing a lawful arrest, or of effecting or assisting an escape or rescue from legal custody, or murder of a police or other law enforcement officer acting in the execution of his duty or of a person assisting any such officer so acting, is murder in the first degree. Any other kind of murder is murder in the secon,d degree. A jury finding a person guilty of murder shall designate by their verdict whether it be murder in the first degree or in the second degree.”
      “2A: 113-3. Murder; plea of guilty not to be received; plea of non vult or nolo contendere and sentence thereon
      “In no case shall the plea of guilty be received upon any indictment for murder, and if, upon arraignment, such plea is offered, it shall be disregarded, and the plea of not guilty entered, and a jury, duly impaneled, shall try the case.
      “Nothing herein contained shall prevent the accused from pleading non vult or nolo contendere to the indictment; the sentence to be imposed, if such plea be accepted, shall be either imprisonment for life or the same as that imposed upon a conviction of murder in the second degree.
      “2A: 113-4. Murder; punishment
      “Every person convicted of murder in the first degree, [his] aiders, abettors, counselors and procurers, shall suffer death unless the jury shall by its verdict, and as a part thereof, upon and after the consideration of all the evidence, recommend life imprisonment, in which case this and no greater punishment shall be imposed.
      “Every person convicted of murder in the second degree shall suffer imprisonment for not more than 30 years.”
      Manslaughter is separately defined in §2A: 113-5 (West 1969).

       The provision for the death penalty in §2A: 113-4 was invalidated in Funicello v. New Jersey, 403 U. S. 948 (1971). On remand, the New Jersey Supreme Court held the death penalty provision severable from the statute and ruled that life imprisonment was to be imposed upon all defendants convicted by a jury of first-degree murder, State v. Funicello, 60 N. J. 60, 286 A. 2d 55, cert. denied sub nom. New Jersey v. Presha, 408 U. S. 942 (1972).

       N. J. Stat. Ann. § 2A: 113-3 (West 1969). As the statute suggests, the trial judge has complete discretion to refuse to accept the plea. See State v. Sullivan, 43 N. J. 209, 246, 203 A. 2d 117, 196 (1964). He may not, however, accept a plea if the defendant maintains his innocence, stands mute, or refuses to admit facts that establish guilt. State v. Reali, 26 N. J. 222, 139 A. 2d 300 (1958); State v. Sands, 138 N. J. Super. 103, 109-112, 350 A. 2d 274, 277-279 (App. Div. 1975); State v. Rhein, 117 N. J. Super. 112, 283 A. 2d 759 (App. Div. 1971).

       Corbitt was indicted on two counts of arson and one count of murder. The State presented its case on a felony-murder basis. He was found guilty on one count of arson and on the murder count. Sentences of life imprisonment for felony murder and a concurrent term for arson were imposed. Because the arson conviction was deemed merged into the murder conviction, the separate sentence for arson was set aside on appeal.

       New Jersey Stat. Ann. § 2A: 113-2 (West 1969) directs a jury finding a defendant guilty of murder to “designate by their verdict whether it be murder in the first degree or in the second degree.” It thus appears that in appropriate cases the jury would be instructed on both first- and second-degree murder. In this ease, however, the State proceeded on a felony-murder basis; the judge considered it to be a first-degree felony-murder case; and there were no instructions on second-degree murder or manslaughter. As far as the record before us reveals, Corbitt did not request or object to the absence of instructions on lesser crimes.

       Under New Jersey law, the plea is to be directed to the indictment, which may charge murder generally. The trial court accepting a plea does not hold a hearing for the purpose of determining the degree of guilt or make any such determination. State v. Williams, 39 N. J. 471, 479, 189 A. 2d 193, 197 (1963); State v. Walker, 33 N. J. 580, 588-589, 166 A. 2d 567, 571-572 (1960).

       If the plea is accepted, the sentencing judge would appear to have discretion not only to impose up to 30 years on facts that might have warranted a first-degree murder verdict by a jury but also to impose a life term where the facts indicate a second-degree murder verdict.

       For example, in Crampton v. Ohio, decided with McGautha v. California, 402 U. S. 183 (1971), we upheld Ohio’s procedure whereby the jury determines both guilt and punishment in a single trial and in a single verdict. Crampton argued that the unitary procedure impaired his Fifth and Fourteenth Amendment right against compelled self-incrimination because he could remain silent on the issue of guilt only at the cost of surrendering any chance to plead his case on the issue of punishment. As we stated there, in rejecting his argument:
      “The criminal process, like the rest of the legal system, is replete with situations requiring 'the making of difficult judgments’ as to which course to follow. McMann v. Richardson, 397 U. S., at 769. Although a defendant may have a right, even of constitutional dimensions, to follow whichever course he chooses, the Constitution does not by that token always forbid requiring him to choose.” Id., at 213.
      See also Brady v. United States, 397 U. S. 742, 750 (1970).
      In United States v. Nobles, 422 U. S. 225 (1975), we held that a District Court could condition the admissibility of impeachment testimony by a defense witness upon production of an investigative report prepared by the witness, rejecting Nobles’ contention that to do so would violate his Sixth Amendment right to compulsory process and cross-examination.

       The Court intimated as much in Jackson itself: “[T]he evil in the federal statute is not that it necessarily coerces guilty pleas and jury waivers but simply that it needlessly encourages them.” 390 U. S., at 583. Decisions after Jackson sustained practices that, although encouraging guilty pleas, were not “needless.” In the first of these cases, Brady v. United States, supra, the petitioner had pleaded guilty and was sentenced to 50 years’ imprisonment after being indicted under the same statute, the Federal Kidnaping Act, at issue in Jackson. Brady claimed that his guilty plea had been involuntary, relying on our holding in Jackson that the death penalty provision of the Federal Kidnaping Act served to encourage guilty pleas needlessly. In effect, Brady argued that Jackson required the invalidation of every guilty plea entered under the Federal Kidnaping Act prior to Jackson. We concluded that he had “read 'far too much into the Jackson opinion.” 397 U. S., at 746. Jackson had in no way altered the test of Boykin v. Alabama, 395 U. S. 238, 242 (1969), that guilty pleas are valid if knowing, voluntary, and intelligent.
      Subsequent decisions reaffirmed the permissibility of plea bargaining even though “every such circumstance has a discouraging effect on the defendant’s assertion of his trial rights,” because the “imposition of these difficult choices [is the] inevitable attribute of any legitimate system which tolerates and encourages the negotiation of pleas.” Chaffin v. Stynchcombe, 412 U. S. 17, 31 (1973). See McMann v. Richardson, 397 U. S. 759 (1970); Parker v. North Carolina, 397 U. S. 790 (1970); North

        Carolina v. Alford, 400 U. S. 25 (1970); Santobello v. New York, 404 U. S. 257 (1971); Bordenkircher v. Hayes, 434 U. S. 357 (1978).
      In Ludwig v. Massachusetts, 427 U. S. 618 (1976), the appellant challenged the Massachusetts system for disposition of certain state crimes in which the defendant is first tried without a jury. If convicted, he may appeal and obtain a jury trial de novo. Although the range of penalties was the same at each tier, Ludwig suffered a harsher sentence when he appealed and was found guilty by a jury. Recognizing the interest of the State in efficient criminal procedure, we rejected a claim based on Jackson that the system discouraged the assertion of the right to a jury trial by imposing harsher sentences upon those that exercised that right. 427 ü. S., at 627-628, n. 4.

       In Bordenkircher, the original indictment did not include the habitual criminal count, which was added when the defendant was reindicted following his refusal to plead. This escalation of the charges after the failure of plea bargaining, which to the dissenters in this Court demonstrated impermissible vindictiveness, is not present here; and we need not rely on this aspect of the Bordenkircher decision. The rationale of that case would a fortiori govern a case where the original indictment contains a habitual criminal count and conviction on that count follows the defendant’s decision not to plead to a lesser charge.

         New Jersey expressly authorizes plea bargaining. N. J. Court Rule 3:9-3 (a). Any agreement reached is “placed on the record in open court at the time the plea is entered.” Rule 3:9-3 (b). The New Jersey Rules also permit disclosure of the tentative agreement to the judge to secure advance approval. Rule 3:9-3 (c). In any event, if the judge “determines that the interest of justice would not be served by effectuating the agreement,” he must permit the defendant to withdraw the plea. Rule 3:9-3 (e).

       The Court has several times recognized the benefits of plea bargaining to the defendant as well as to the State. In Blackledge v. Allison, 431 U. S. 63, 71 (1977), we said:
      “Whatever might be the situation in an ideal world, the fact is that the guilty plea and the often concomitant plea bargain are important components of this country’s criminal justice system. Properly administered, they can benefit all concerned. The defendant avoids extended pretrial incarceration and the anxieties and uncertainties of a trial; he gains a speedy disposition of his case, the chance to acknowledge his guilt, and a prompt start in realizing whatever potential there may be for rehabilitation. Judges and prosecutors conserve vital and scarce resources. The public is protected from the risks posed by those charged with criminal offenses who are at large on bail while awaiting completion of criminal proceedings.” (Footnote omitted.)
      See also Santobello v. New York, supra, at 260-261; Brady v. United States, 397 U. S., at 751-752. There is thus much more to be derived from plea bargaining than simply conserving scarce prosecutorial resources, and those benefits accrue equally where the plea bargaining occurs within a statutory framework.

       The dissent’s suggestion, post, at 229-230, that New Jersey concedes that its statutes have both the purpose and effect of penalizing the assertion of the right not to plead guilty is untenable, see Brief for Appellee 28-31, and seems inconsistent with the later description of the State’s position, post, at 230.

       The dissent appears to question any system that subjects the defendant who stands trial to a substantial risk of greater punishment than the defendant who pleads guilty. But in the next breath, the dissent appears to embrace plea bargaining, although the plea-bargaining systems operating in a majority of the jurisdictions throughout the country inherently extend to defendants who plead guilty the probability or the certainty of leniency that will not be available if they go to trial.
      The dissent asserts that the attack here is on the statutory scheme rather than upon the system of plea bargaining, which is said to individualize defendants and does not mandate a different standard of punishment depending solely on whether or not a plea is entered. The distinction is without substance for the purposes of this case. In the first place, plea bargaining by state prosecutors operates by virtue of state law, here by virtue, of the formal rules of the Supreme Court of New Jersey. That system permits a proper amount of leniency in return for pleas, leniency that is denied if one goes to trial. In this sense, the standard of punishment is necessarily different for those who plead and for those who go to trial. For those who plead, that fact itself is a consideration in sentencing, a consideration that is not present when one is found guilty by a jury. Second, under the New Jersey statutes, pleas may be rejected even if tendered; there must, for example, be a factual basis for the plea. Even if a plea is accepted, there is discretion to impose life imprisonment. The statute leaves much to the judge and to the prosecutor and does not mandate lesser punishment for those pleading non vult than is imposed on those who go to trial. It is also true that under normal circumstances, juries in New Jersey may find a defendant guilty of second-degree murder rather than first.
      Third, we cannot hold that a prosecutor may charge a person with a crime carrying a mandatory punishment and secure a valid conviction, despite his power to offer leniency to those who plead — including dismissal of the mandatory count in return for a plea — and yet hold that the legislature may not openly provide for the possibility of leniency in return for a plea. This is particularly true where it is contemplated that plea bargaining will in any event go forward within the limits set by the legislature.

       We do not suggest that every conceivable statutory sentencing structure, plea-bargaining system, or particular plea bargain would be constitutional. We hold only that a State may make due allowance for pleas in its sentencing decisions and that New Jersey has not exceeded its powers in this respect by its statutory provision extending the possibility of leniency to those who plead non vult in homicide cases.

       Indeed, despite the appellant’s claim that the statute coerces or encourages guilty pleas, the appellant himself pleaded not guilty, went to trial and was convicted. The petitioner in United States v. Jackson, by contrast, brought a facial attack on the constitutionality of the statute by way of a motion to dismiss the indictment. See 390 U. S., at 571.

       “[T]he plea is not evidence. Nor is it testimonial. It is not under oath. Nor is it subject to cross-examination. When it is 'not guilty,’ it has no effect as testimony or evidence .... The function of that plea is to put the Government to its proof and to preserve the right to defend. . . .
      “If the plea were testimonial or evidentiary, the court would have no power to demand it. . . . But if, having used its power to extract the plea for its proper purpose, it can go further and over the defendant’s objection convert or pervert it into evidence, in substance if not in form it compels the defendant to testify in his own case. That it has no power to do.” Wood v. United States, 75 U. S. App. D. C. 274, 282-283, 128 F. 2d 265, 273-274 (1942) (Rutledge, J.).
      See also Sorrells v. United States, 287 U. S. 435, 452 (not-guilty plea is not inconsistent with entrapment defense even though latter implies admission that the offense was committed); State v. Valentina, 71 N. J. L. 552, 556, 60 A. 177, 179 (1905) (not-guilty plea and confession of guilt are not inconsistent).

       Among the implications of the Fifth Amendment privilege against self-incrimination is that “[g] overaments, state and federal, [may be] constitutionally compelled to establish guilt by evidence independently and freely secured, and may not by coercion prove a charge against an accused out of his own mouth.” Malloy v. Hogan, 378 U. S. 1, 7-8. As expressed by Dean Wigmore, the Fifth Amendment gives the individual the right to “requir[e] the government in its contest with the individual to shoulder the entire load.” 8 J. Wigmore, Evidence § 2251, p. 317 (McNaughten rev. ed. 1961), quoted in Murphy v. Waterfront Comm’n, 378 U. S. 52, 55.

       “Upon that plea the accused may stand, shielded by the presumption of his innocence, until it appears that he is guilty.” Davis v. United States, 160 U. S. 469, 485-486. See Byrd v. United States, 119 U. S. App. D. C. 360, 362, 342 F. 2d 939, 941 (1965); United States v. Mayfield, 59 F. 118, 119 (ED La. 1893).
      Long before the incorporation of the Fifth Amendment into the Fourteenth, the States had firmly enforced these principles:
      “[A] plea of not guilty, to a criminal charge, at once calls to the defense of defendant the presumption of innocence, denies the credibility of evidence for the State, and casts upon the State the burden of establishing guilt beyond a reasonable doubt. . . . These words are not mere formalities, but express vital principles of our criminal jurisprudence and criminal procedure. These principles ought not to be readily abandoned, or worn away by invasion.” State v. Hardy, 189 N. C. 799, 80-L-805, 128 S. E. 152, 155 (1925).

       “Our problem is to decide whether the Constitution permits the establishment of such a death penalty, applicable only to those defendants who assert the right to contest their guilt before a jury. The inevitable effect of any such provision is, of course, to discourage assertion of the Fifth Amendment right not to plead guilty and .to deter exercise of the Sixth Amendment right to demand a jury trial. If the provision had no other purpose or effect than to chill the assertion of constitutional rights by penalizing those who choose to exercise them, then it would be patently unconstitutional.” United States v. Jackson, 390 U. S., at 581 (footnote omitted).

       This conclusion was the predicate for the Court’s holding in Lindsey v. Washington, 301 U. S. 397. In that case the Court held that a change in statutory sentencing provisions for burglary could not be applied retroactively even though the new provisions did not increase the 15-year maximum sentence, but only made it mandatory:
      “The effect of the new statute is to make mandatory what was before only the maximum sentence. . . .
      “Removal of the possibility of a sentence of less than fifteen years . . . operates to [defendants’] detriment in the sense that the standard of punishment adopted by the new statute is more onerous than that of the old.” Id., at 400-401.
      Accord, Dobbert v. Florida, 432 U. S. 282, 300 (“[0]ne is not barred from challenging a change in the penal code on ex post facto grounds simply because the sentence he received under the new law was not more onerous than that which he might have received under the old”). See also Lockett v. Ohio, 438 U. S. 586, 619 (Blackmun, J., concurring in judgment) (A statutory sentencing scheme under which “a defendant can plead not guilty only by enduring a semimandatory [death-penalty provision], rather than [the] purely discretionary, capital-sentencing provision” applicable to defendants who plead guilty creates a “disparity between a defendant’s prospects under the two sentencing alternatives [that] is . . . too great to survive under Jackson”).

      Mr. Justice Stone’s opinion for the unanimous Court in Lindsey also disposes of appellee’s argument that the statute here is distinguishable from the one in Jackson because it does not make death the consequence of a “false” not-guilty plea: When “a punishment for murder of life imprisonment or death [is] changed to death alone,” it is “only a more striking instance of the detriment which ensues from the revision of a statute providing for a maximum and a minimum punishment by making the maximum compulsory.” 301 U. S., at 401. In either case, “[i]t is plainly to the substantial disadvantage of petitioners to be deprived of all opportunity to receive” less than the maximum. Id., at 402-403. See also Brady v. United States, 397 U. S. 742, 747-752, holding that a defendant who pleads guilty to avoid the death penalty is entitled to no different treatment from one who pleads guilty to avoid any other “maximum sentence authorized by law.”

       In one important respect, the statute invalidatedin Jackson was less onerous than the New Jersey statute involved in this case. The Jackson defendant could avoid the more severe penalty by merely forgoing his Sixth Amendment right to a jury and trying the case to the court alone. Here, however, the price of avoiding the statutory penalty for an incorrect plea of not guilty is the waiver not only of the right to a jury but also the right to put the government to its proof, to confront one’s accusers, and to present a defense. See Boykin v. Alabama, 395 U. S. 238, 243.

       See North Carolina v. Pearce, 395 U. S. 711, 723. Whenever this flexibility and individualization has given way to prosecutorial or judicial vindictiveness against those who assert their rights, the Court has condemned the practice. Id., at 725. The message of Pearce, as well as Jackson; Brady v. United States, supra; Chaffin v. Stynchcombe, 412 U. S. 17; and Bordenkircher v. Hayes, 434 U. S. 357, is that where the legislature, prosecutor, judge, or all three “deliberately employ their charging and sentencing powers to induce [a] defendant to tender a plea of guilty/' Brady, supra, at 751 n. 8, and where they do so with the “objective [of] penalizing] a person’s reliance on his legal rights, [such action] is 'patently unconstitutional.’ ” Bordenkircher, supra, at 363, quoting Chaffin, supra, at 32-33, n. 20.

       This point was made most forcefully in Brady v. United States. In that case, the Court upheld a conviction under the same statute challenged in Jackson. However, petitioner in Brady, unlike respondent in Jackson, had not received a higher sentence as “the price of a jury trial.” 397 U. S., at 746. Instead, he had knowingly and voluntarily pleaded guilty and brought himself within the lower range of penalties provided for those who did not insist upon trial. The Court affirmed the conviction because the plea-bargaining process, even when buttressed by the invalid statute, was not “inherently coercive of guilty pleas.” Ibid.

       See Bordenkircher v. Hayes, supra, at 364.

       See Coker v. Georgia, 433 U. S. 584, 594. Cf. United States v. Hudson and Goodwin, 7 Cranch 32.

       “To punish a person because he has done what the law plainly allows him to do is a due process violation of the most basic sort.” Bordenkircher v. Hayes, supra, at 363.

        United States v. Hare, 26 P. Cas. 148 (No. 15,304) (CC Md. 1818); United States v. Gibert, 25 F. Cas. 1287 (No. 15,204) (CC Mass. 1834) (Story, J.). The days have long since passed when a refusal to plead qualified as an admission of guilt or an invitation for the extraction of a plea through torture or piene forte et dure. See McPhaul v. United States, 364 U. S. 372, 386-387 (Douglas, J., dissenting); In re Smith, 13 F. 25 (CC Mass. 1882). Today, it is universally accepted that silence at arraignment is equivalent to a plea of not guilty. See United States v. Beadon, 49 F. 2d 164 (CA2 1931), cert. denied, 284 U. S. 625.


source: Caselaw Access Project

author: Me. Justice Marshall Mr. Justice Stevens,

license: Public Domain

text:
    BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM v. FIRST LINCOLNWOOD CORP.
    No. 77-832.
    Argued October 11, 1978
    Decided December 11, 1978

      Marshall, J,, delivered the opinion of the Court, in which Burger, C. J., and BreNNAN, Stewart, White, BlackmuN, and Powell, JJ., joined. SteveNs, J., filed a dissenting opinion, in which RehNQUist, J., joined, post, p. 254.

      Stephen M. Shapiro argued the cause for petitioner. With him on the briefs were Solicitor General McCree, Assistant Attorney General Babcock, Harriet S, Shapiro, Ronald R. Glancs, Neal L. Petersen, and J. Virgil Mattingly.

      George B. Collins argued the cause and filed a brief for respondent.

        Horace R. Hansen and Wayne P. Dordell filed a brief for the Independent Bankers Association of America urging affirmance.

   Me. Justice Marshall

delivered the opinion of the Court.

Section 3 (a) of the Bank Holding Company Act of 1956, 12 U. S. C. § 1842 (a), prohibits any company from acquiring control of a bank without prior approval by the Board of Governors of the Federal Reserve System (Board). Under §3 (c)(1) of the Act, 12 U. S. C. § 1842 (c)(1), the Board may not approve a transaction that would create a monopoly or further an attempt to monopolize the business of banking. In addition, it must disapprove a transaction that would generate anticompetitive effects not clearly outweighed by beneficial effects upon the bank’s ability to serve the community. § 1842 (c) (2). The final sentence of § 3 (c) directs that

“[i]n every case, the Board shall take into consideration the financial and managerial resources and future prospects of the company or companies and the banks concerned, and the convenience and needs of the community to be served.”

The threshold question before us is whether this final sentence authorizes the Board to disapprove a transaction on grounds of financial unsoundness in the absence of any anticompeti-tive impact. If so, we must decide whether the Board can only exercise that authority when the transaction would cause or exacerbate the financial unsoundness of the holding company or a subsidiary bank.

I

The First National Bank of Lincolnwood, Ill., is controlled by four individuals who hold 86% of its stock in a voting trust. These individuals organized respondent, the First Lincoln-wood Corp., to serve as a bank holding company. They planned to exchange their shares in the bank for shares of respondent and, in addition, to have respondent assume a $3.7 million debt they had incurred in acquiring control of the bank. Respondent intended to use the dividends it would receive on the bank’s shares to retire this debt over a 12-year period. Further, in order to augment the bank’s capital, respondent would issue $1.5 million in capital notes and then use the proceeds to purchase new shares issued by the bank. The purpose of restructuring ownership interests in this fashion was to enable the holding company and the bank to file a consolidated tax return and thereby realize substantial tax savings.

Because under the proposed transaction respondent would become a bank holding company, § 3 (a) of the Act required that the proposal be submitted for the Board’s approval. See n. 1, supra. Respondent filed its application with the Federal Reserve Bank of Chicago, as specified by Board regulations. The Chicago Reserve Bank concluded that the Lincolnwood bank’s capital position — in essence, the difference between its assets and its liabilities — was inadequate and, under respondent’s proposal, was unlikely to improve enough to attain the minimum level the Board had determined necessary to protect the bank’s depositors. Nonetheless, the Lincolnwood bank’s favorable earnings prospects and strong management led the Chicago Reserve Bank to recommend that the transaction be approved. The Comptroller of the Currency, however, independently reviewed respondent’s application and concluded that it should be denied unless the bank’s capital position was strengthened.

Respondent thereupon modified its proposal to accommodate the Comptroller’s objections. Instead of issuing $1.5 million in capital notes and using the proceeds to purchase new bank stock, respondent proposed that the bank itself sell $1 million in long-term capital notes and $1.1 million in new common stock. In addition, respondent proposed a substantial reduction in the dividends to be paid on the bank stock. Upon review of the modified proposal, the Chicago Reserve Bank adhered to its original recommendation, finding the modification salutary insofar as it increased the total addition to the bank’s capital, though “slightly unfavorable” insofar as it decreased the addition to the bank’s equity capital from $1.5 to $1.1 million. The Comptroller considered the revised plan superior to the original proposal; therefore, he, too, recommended approval.

The Board staff independently evaluated the application and determined that the bank’s projected capital position would fall below the Board’s requirements. The staff also found that respondent had not established its ability to raise the additional capital without the individual shareholders’ incurring more debt. Although acknowledging that the bank’s management was capable, the staff concluded that

“it would appear desirable that Bank’s overall capital position should be materially improved and that financing arrangements for the proposed capital injections into Bank [should] be made more definite.” App. 54 — 55.

The Board concurred. It reviewed each of the elements enumerated in §3(c), determining first that the proposal had no anticompetitive impact because the transaction merely transferred control of the bank “from individuals to a corporation owned by the same individuals.” First Lincolnwood Corp., 62 Fed. Res. Bull. 153 (1976). Similiarly, the Board found that the proposal would effect no significant changes in the services offered by the bank to customers, so factors relating to the convenience and needs of the community militated neither for nor against approval. Id., at 154. Thus, the financial and managerial considerations specified in the final sentence of § 3 (c) were dispositive of respondent’s application.

Addressing these considerations, the Board ruled that a bank holding company “should provide a source of financial and managerial strength to its subsidiary bank(s).” 62 Fed. Res. Bull., at 153. Here, the Board found, even if the bank’s optimistic earnings projections were realized, respondent would lack the financial flexibility necessary both to service its debt and to maintain adequate capital at the bank. This, as well as the uncertainty regarding the proposed source of the capital injections, raised serious doubts as to respondent’s financial' ability to resolve unforeseen problems that could arise at the bank. The Board therefore concluded that

“it would not be in the public interest to approve the formation of a bank holding company with an initial debt structure that could result in the weakening of Bank’s overall financial condition.” Id., at 154.

A divided panel of the Court of Appeals for the Seventh Circuit affirmed, the majority finding substantial evidence to support the denial of respondent’s application. 546 F. 2d 718, 720-721 (1976). On rehearing en banc, the court unanimously set aside the Board’s order. The court recognized that Congress had empowered the Board “to deny approval of a bank acquisition upon finding it not to be in the public interest for reasons other than an anticompetitive tendency.” 560 F. 2d 258, 261 (1977). However, in the court’s view, § 3 (c) of the Act did not permit the Board to withhold approval because of financial or managerial deficiencies unless those deficiencies were “caused or enhanced by the proposed transaction.” 560 F. 2d, at 262. This transaction, the court observed, merely reshuffled ownership interests in the bank. Apart from the proposed addition to capital and the tax advantage, which could accelerate reduction of the $3.7 million debt, respondent’s proposal was without financial consequence. The court therefore held that the Board had overstepped its authority under § 3 (c) in denying respondent’s application. 560 F. 2d, at 262-263.

We granted certiorari because of the impact of this holding on the Board’s ability to fulfill its regulatory responsibilities under the Bank Holding Company Act. 434 U. S. 1061 (.1978). We conclude that the court below improperly restricted the Board’s authority, and, accordingly, we reverse.

II

Respondent contends that the Court of Appeals misinterpreted the legislative history of the Bank Holding Company Act in sustaining the Board’s authority to deny applications for holding-company status solely on grounds of financial or managerial unsoundness. As respondent reads the legislative history, Congress’ only concern in passing the Act was with the anticompetitive potential in the concentration of banking resources and the combination of banking and nonbanking enterprises. See S. Rep. No. 1095, 84th Cong., 1st Sess., 2 (1955); S. Rep. No. 1179, 89th Cong., 2d Sess., 2 (1966). This focus on competitive considerations was reflected in the amendment of the Act in 1966 to conform § 3 (c) with the standards enunciated in the Bank Merger Act amendments of the same year. See 80 Stat. 8, 12 U. S. C. § 1828 (c)(5). The amended standards in the Bank Merger Act were intended to provide an exception to the antitrust laws for those bank mergers in which the benefits to the community outweighed the anticompetitive impact. See United States v. Third Nat. Bank, 390 U. S. 171 (1968). By incorporating these same standards into the Bank Holding Company Act, respondent infers, Congress intended to authorize the Board to consider financial and managerial resources only as counterweights to a transaction’s anticompetitive impact. We do not agree that the Board’s authority under the Bank Holding Company Act is so limited.

The language of the statute supports the Board’s interpretation of § 3 (c) as an authorization to deny applications on grounds of financial and managerial unsoundness even in the absence of any anticompetitive impact. Section 3 (c) directs the Board to consider the financial and managerial resources and future prospects of the applicants and banks concerned “[i]n every case,” not just in cases in which the Board finds that the transaction will have an anticompetitive effect.

Moreover, the Board’s interpretation of § 3 (c) draws support from the legislative history. Section 19 of the original version of the Banking Act of 1933, 48 Stat. 186, authorized the Board to regulate the financial and managerial soundness of bank holding companies and their banking subsidiaries. Holding companies were required to obtain a permit from the Board before voting the shares of a national bank. Section 19 directed the Board to consider, in acting upon an application for a voting permit, the financial condition of the company and the general character of its management. 48 Stat. 186. In addition, an applicant had to submit to financial examination by the Board and to maintain a prescribed reserve of liquid assets. 48 Stat. 187. However, the voting-permit provisions applied only if the bank was a member of the Federal Reserve System and the holding company sought to exercise control by actually voting the bank shares. Because of this limitation, § 19 ultimately proved of little value in ensuring the financial responsibility of bank holding companies and their subsidiaries. See H. R. Rep. No. 609, 84th Cong., 1st Sess., 4-5 (1955).

To ameliorate this deficiency, Congress expanded the Board's authority by enacting the Bank Holding Company Act of 1956. Section 3 (c) of the Act enumerated five factors for the Board to consider whenever a company sought to acquire control of a bank:

“(1) the financial history and condition of the company or companies and the banks concerned; (2) their prospects; (3) the character of their management; (4) the convenience, needs, and welfare of the communities and the area concerned; and (5) whether or not the effect of such acquisition or merger or consolidation would be to expand the size or extent of the bank holding company system involved beyond limits consistent with adequate and sound banking, the public interest, and the preservation of competition in the field of banking.” 70 Stat. 135.

The House Report on the Act noted the similarity between these factors and those specified in other banking statutes as the basis for admitting state banks to membership in the Federal Reserve System and for granting federal deposit-insurance coverage. H. R. Rep. No. 609, supra, at 15. In both instances, the adequacy of the bank’s capital is an important factor to be considered by the reviewing agency. See 12 TJ. S. C. §§ 329, 1816.

In amending § 3 (c) to conform to the language of the Bank Merger Act in 1966, see supra, at 243, Congress did not intend to confine the Board’s consideration of financial and managerial soundness only to transactions that would have an anticompetitive impact. The sole reason given for the change was “the interests of uniform standards” in regulating both mergers and acquisitions in the banking industry. S. Rep. No. 1179, supra, at 9. Regardless of whether Congress intended to limit the inquiry under the Bank Merger Act, there is no indication that it intended to incorporate that limitation into the Bank Holding Company Act. Indeed, in 1966 Congress repealed the voting-permit provisions of the 1933 Act, which had been left intact in 1956, because it believed that the Board retained authority under § 3 (c), even as amended, to ensure the financial and managerial soundness of holding companies and their subsidiary banks. The Senate Committee on Banking and Currency stated:

“Since the Bank Holding Company Act makes it necessary for any bank holding company to obtain the Board's prior approval before acquiring the stock of any bank (whether member or nonmember) and since, in granting that approval, the Board must consider the financial condition and management of the holding company, the voting permit procedure . . . serves no substantial purpose.” S. Rep. No. 1179, supra, at 12.

In 1970, Congress amended the Bank Holding Company Act to extend its coverage to holding companies that controlled only one bank. 84 Stat. 1760, 12 U. S. C. § 1841 (a). Previously, the Act had applied only to multibank holding-companies. The principal purpose of this change was to prevent one-bank holding companies from entering businesses not related to banking. S. Rep. No. 91-1084, pp. 2-4 (1970). Nothing in the legislative history of the 1970 amendments suggests that in extending the Act, Congress intended to depart from its prior understanding of the Board’s authority or to establish a different rule for one-bank holding companies.

Our conclusion as to the scope of the Board's authority is bolstered by reference to the principle that an agency’s longstanding construction of its statutory mandate is entitled to great respect, “especially when Congress has refused to alter the administrative construction.” Red Lion Broadcasting Co. v. FCC, 395 U. S. 367, 381 (1969); Zemel v. Rusk, 381 U. S. 1, 11-12 (1965); Udall v. Tollman, 380 U. S. 1, 16 (1965). The Board has regularly treated deficiencies in the financial and managerial resources of holding companies and their banking subsidiaries as sufficient grounds for denying an application. Clayton Bancshares Corp., 50 Fed. Res. Bull. 1261, 1264-1265 (1964); Mid-Continent Bancorporation, 52 Fed. Res. Bull. 198, 200-201 (1966); Midwest Bancorporation, Inc., 56 Fed. Res. Bull. 948, 950 (1970); Citizens Bancorp, 61 Fed. Res. Bull. 806 (1975); Bankshares of Hawley, Inc., 62 Fed. Res. Bull. 610 (1976); see 12 CFR § 265.2 (f) (22) (vii) (1978). Moreover, Congress has been made aware of this practice, yet four times has “revisited the Act and left the practice untouched.” Saxbe v. Bustos, 419 U. S. 65, 74 (1974). See 80 Stat. 236; 84 Stat. 1760; 91 Stat. 1388; 92 Stat. 3641. We therefore agree with the Court of Appeals that the Board can disapprove formation of a bank holding company solely on grounds of financial or managerial unsoundness.

III

While the Court of Appeals recognized the Board’s authority to treat financial or managerial unsoundness as a dispositive consideration, it held that this authority was limited to instances in which the unsoundness was caused or exacerbated by the proposed transaction. The Court of Appeals rejected the Board’s argument that permission to form a holding company is “a reward which it may withhold until the applicant’s financial status fulfills the Board’s standard of desirability.” 560 F. 2d, at 262. The legislative history, the court held, revealed nothing that would allow the Board to disapprove formation of a bank holding company where the transaction would not weaken a subsidiary bank’s financial condition. In addition, the already extensive regulation of the financial integrity of banks by the Comptroller of the Currency and state regulatory agencies persuaded the court that Congress could not have intended to extend identical authority to the Federal Reserve Board. Id., at 262-263.

We perceive no basis for the limitation the Court of Appeals imposed. Certainly, it is not compelled by the language of the statute. By its terms, § 3 (c) requires the Board to consider financial and managerial factors in “every case.” Just as we observed earlier that this language encompasses cases in which the proposed transaction would have no anti-competitive effect, supra, at 243, so, too, it encompasses cases in which the transaction would not weaken the bank or the bank holding company. Indeed, the Court of Appeals’ construction of the statute would require the Board to approve formation of a bank holding company with corrupt management simply because management would become no more corrupt by virtue of the transaction. We hesitate to adopt a construction that would yield such an anomalous result.

Furthermore, the legislative record does provide support for the Board’s actions. In deliberations on the Bank Holding Company Act, see, e. g., H. R. Rep. No. 609, 84th Cong., 1st Sess., 4r-5 (1955); H. R. Rep. No. 95-1383, p. 19 (1978), and in subsequent inquiries into banking regulation, see, e. g., Hearing on Problem Banks, supra, n. 6; Hearings on the Safe Banking Act of 1977, pts. 1-4, supra, n. 13, Congress has evinced substantial concern for the financial soundess of the banking system. And Congress has long regarded capital adequacy as a measure of bank safety. See, e. g., 12 U. S. C. § 329 (Federal Reserve Act), § 1816 (Federal Deposit Insurance Act); S. Rep. No. 133, 63d Cong., 1st Sess., pt. 2, p. 11 (1913); S. Rep. No. 1623, 82d Cong., 2d Sess., 2 (1952). To rule that the Board could not require applicants for holding-company status and their subsidiary banks to meet minimum capital-adequacy requirements would be inconsistent with this general legislative mandate.

Nor can we accept the conclusion that Congress intended to reserve questions of bank safety to the Comptroller or state agencies except where a transaction would harm the financial condition of an applicant or the bank. The history of the Bank Holding Company Act nowhere suggests that Congress sought to delineate such a jurisdictional boundary. Indeed, our decision in Whitney Nat. Bank v. Bank of New Orleans, 379 U. S. 411 (1965), indicates that the Board’s jurisdiction is paramount. We ruled there that the Comptroller could not deny a new bank a license to do business — a decision normally within his competence, see 12 U. S. C. §§26, 27— once the Board approved a bank holding company transaction that entailed formation of the new bank. 379 U. S., at 419, 423. It follows that the Federal Reserve Board's actions here are not invalid merely because the powers exercised duplicate those of other regulators.

Again, our conclusion is influenced by the principle that courts should defer to an agency’s construction of its own statutory mandate, Red Lion Broadcasting Co. v. FCC, 395 U. S., at 381; Commissioner v. Sternberger’s Estate, 348 U. S. 187, 199 (1955), particularly when that construction accords with well-established congressional goals. The Board has frequently reiterated that holding companies should be a source of strength to subsidiary financial institutions. See, e. g., Northern States Financial Corp., 58 Fed. Res. Bull. 827, 828 (1972); Citizens Bancorp, 61 Fed. Res. Bull. 806 (1975); Downs Bancshares, Inc., 61 Fed. Res. Bull. 673 (1975). It has used the substantial advantages of bank holding-company status to induce applicants to improve their own and their subsidiaries’ capital positions. See P. Heller, Handbook of Federal Bank Holding Company Law 127, and n. 195 (1976); The Bank Holding Company — 1973, pp. 35, 83 (R. Johnson ed. 1973). In fact, between 1970 and 1975, the Board convinced 397 applicants to provide additional capital totaling $788 million and indirectly prompted the infusion of even more capital. Hearings on Financial Institutions and the Nation’s Economy, supra n. 13, at 2403 (testimony of Philip Coldwell, member of the Board of Governors of the Federal Reserve System). Congress has been apprised of this consistent administrative practice, ibid.; Compendium of Major Issues in Bank Regulation, supra n. 13, at 379, and has not undertaken to change it. Indeed, a Report of the Senate Committee on Banking, Housing, and Urban Affairs in 1977 echoed the exact language of the Board’s standard. S. Rep. No. 95-323, p. 11 (“Holding companies are supposed to be a source of strength to subsidiary financial institutions”).

We hold that the Board may deny applications for holding-company status solely on grounds of financial or managerial unsoundness, regardless of whether that unsoundness would be caused or exacerbated by the proposed transaction.

IV

Respondent contends that the Board’s denial of its application was arbitrary and capricious. We have already determined that the Board’s “source of strength” requirement is consistent with the language, purpose, and legislative history of the Bank Holding Company Act. Our only remaining inquiry is whether substantial evidence supports the Board’s finding that respondent fell short of this standard. 12 U. S. C. § 1848.

The Court of Appeals panel had “no difficulty” in finding substantial evidence to sustain the Board’s decision, 546 F. 2d, at 720, and respondent did not press this issue in its petition for rehearing en banc. We, too, find in this record more than the amount of evidence “a reasonable mind might accept as adequate to support [the Board’s] conclusion.” Consolidated Edison Co. v. NLRB, 305 U. S. 197, 229 (1938); accord, Richardson v. Perales, 402 U. S. 389, 401 (1971); Consolo v. FMC, 383 U. S. 607, 619-620 (1966). The application failed to establish that respondent could raise the $2.1 million in additional capital in the manner proposed. Moreover, it revealed that even with this infusion, the bank’s capital would have been well below the level the Board had determined necessary to sustain the financial soundness of the enterprise. Thus, the Board was entitled to conclude that respondent would not be a sufficient source of financial and managerial strength to its subsidiary bank. Having so determined, the Board was entitled to deny the application.

We hold that the Board’s actions were within the authority-conferred by Congress and were supported by substantial evidence. Consequently, the judgment is

Reversed.

Mr. Justice Stevens,

with whom Mr. Justice Rehnquist joins, dissenting.

This case involves a proposal to restructure the ownership of a relatively small bank in order to reduce its income taxes. From the standpoint of the bank’s competitors, its creditors, its owners, and its customers, as well as the public at large, the proposed transaction is at worst completely harmless, and at best substantially beneficial.

The Federal Reserve Board nevertheless refused to approve the transaction, not because of any concern about adverse effects of the transaction itself, but rather to induce the owners of the bank to take action that the Board has no authority to require of bank owners generally. In the Board’s view, its approval power is a sort of lever that it may use to bend the will of independent bank owners and managers. I share the opinion expressed by Chief Judge Fairchild for the unanimous Court of Appeals for the Seventh Circuit sitting en banc that the application of this kind of leverage has not been authorized by Congress.

The normal reason for subjecting any type of transaction to advance administrative approval is a concern about the possible consequences of the transaction itself. I can think of no judicial precedent or statutory analog authorizing an agency to use approvals as an all-purpose tool to accomplish objects entirely unrelated to the approved transaction. Before concluding that Congress intended to pass such an unprecedented approval statute, therefore, I would insist upon a clear expression of that intent from Congress itself. Because the language, structure, and legislative history of § 3 (c) of the Bank Holding Company Act of 1956, 12 U. S. C. § 1842 (c), belie any such intent, I cannot accept the Board’s interpretation.

Read in its entirety, the language of § 3 (c) confines the Board’s authority to the evaluation of the effects of proposed holding company transactions. Specifically, the statute commands the Board to disapprove any acquisition “which would result in a monopoly,” or “whose effect” may be substantially to lessen competition, unless it finds that the “anti-competitive effects” are outweighed “by the probable effect of the transaction in meeting the convenience and needs of the community.” Although the last sentence in § 3 (c) does not also explicitly limit the Board’s consideration to the financial and managerial “effects” of the proposed reorganization, when read in context its reference to “future prospects” surely reflects the same concern for the consequences of the transaction rather than pre-existing or unrelated conditions.

The overall structure of the federal banking laws lends credence to this interpretation. It is not the Board but instead the Comptroller of the Currency that has day-to-day regulatory jurisdiction over existing financial and managerial conditions at national banks such as the one involved here. If the Board can employ its holding-company approval power as a lever for inducing banks to achieve more satisfactory financing, management, future prospects, and community service, it can indirectly exercise authority that Congress has denied it and given directly to another agency.

The sparse legislative history cited by the Court on this point, ante, at 250, is of no help to the Board's position. It is true that Congress has been concerned with the “financial soundness” and “capital adequacy” of banks controlled by holding companies. But that concern is simply irrelevant to the issue whether Congress intended the Board to deny holding-company approval that would not adversely affect, but rather would enhance, the bank's financial soundness and capital adequacy.

The authority claimed by the Board is also illogical. If certain capital ratios are essential for sound banking operations, and if the Comptroller is unable to achieve them, then the Board should be given power to require them by a general rule or standard applicable to all banks. Haphazard enforcement against only those banks that seek approval of holding company status is a most unusual and disorderly way to administer any significant policy.

In the end, the Court’s decision rests entirely on “the principle that courts should defer” to the administrative agency’s own interpretation of its statutory authority. Ante, at 251. The Court assumes that the Board's asserted authority originated with the passage of the Bank Holding Company Act of 1956. Ante, at 244. Not until eight years later, however, did the Board purport to exercise that authority, and it did so without explaining the statutory basis for its actions. Clayton Bancshares Corp., 50 Fed. Res. Bull. 1261, 1264-1265 (1964); see opinion of the Court, ante, at 248. Such a belated and casual assertion of power by the Board, no matter how long it has persisted, hardly qualifies as the type of administrative policy that may stand in place of an expression of legislative intent. See SEC v. Sloan, 436 U. S. 103 (overturning as beyond the authority of the SEC a policy followed by that agency for 34 years). See also Adamo Wrecking Co. v. United States, 434 U. S. 275, 287-289, and n. 5. I would not allow this agency, no matter how well respected and how well motivated, to construe vague statutory language as conferring such wide-ranging power on itself. Like Chief Judge Fairchild and his colleagues, I “do not find this power or breadth of discretion in the statute.” 560 F. 2d 258, 262 (CA7 1977).

I respectfully dissent.

       More specifically, §3 (a), 70 Stat. 134, as amended, 80 Stat. 237, 12 U, S. C. § 1842 (a), provides in pertinent part:
      “It shall be unlawful, except with the prior approval of the Board, (1) for any action to be taken that causes any company to become a bank holding company; (2) for any action to be taken that causes a bank to become a subsidiary of a bank holding company; (3) for any bank holding company to acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, such company will directly or indirectly own or control more than 5 per centum of the voting shares of such bank; (4) for any bank holding company or subsidiary thereof, other than a bank, to acquire all or substantially all of the assets of a bank; or (5) for any bank holding company to merge or consolidate with any other bank holding company.”
      Section 2 (a) (1) of the Act, 70 Stat. 133, as amended, 84 Stat. 1760, 12 U. S. C. § 1841 (a)(1), defines a “bank holding company” as “any company which has control over any bank or over any company that is or becomes a bank holding company by virtue of this Act.”
      A company has “control” over a bank or over any company if
      “(A) the company directly or indirectly or acting through one or more other persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the bank or company;
      “(B) the company controls in any manner the election of a majority of the directors or trustees of the bank or company; or
      “(C) the Board determines, after notice and opportunity for hearing, that the company directly or indirectly exercises a controlling influence over the management or policies of the bank or company.” § 2 (a) (2) of the Act, 70 Stat. 133, as amended, 84 Stat. 1760, 12 U. S. C. § 1841 (a) (2).

       In its entirety, § 3 (c) provides:
      “The Board shall not approve—
      “(1) any acquisition or merger or consolidation under this section which would result in a monopoly, or which would be in furtherance of any combination or conspiracy to monop[o]lize or to attempt to monopolize the business of banking in any part of the United States, or
      “(2) any other proposed acquisition or merger or consolidation under this section whose effect in any section of the country may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint or [sic] trade, unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.
      “In every case, the Board shall take into consideration the financial and managerial resources and future prospects of the company or companies and the banks concerned, and. the convenience and needs of the community to be served.” 70 Stat. 135, as amended, 80 Stat. 237, 12 U. S. C. § 1842(c).

       The four individuals incurred part of this $3.7 million debt in order to buy out the shares of a former chairman and president of the bank, who had been indicted for securities fraud. See 546 F. 2d 718, 723-724,. n. 1 (CA7 1976) (Fairchild, C. J., dissenting from the panel opinion). The entire $3.7 million debt was secured by the bank stock they had acquired in this and previous transactions. While the proposed transaction with respondent would relieve the individual shareholders of their primary obligations under the loans, these shareholders would remain secondarily liable if respondent defaulted and its obligations exceeded the value of the bank’s stock. See App. 24, 29-30, 42, 55-56.

       The Internal Revenue Code of 1954,26 U. S. C. § 1501, permits an affiliated group of corporations to file a consolidated income tax return. Respondent and the bank would be affiliated by virtue of respondent’s ownership of at least 80% of the bank’s stock. 26 U. S. C. § 1504. Filing a consolidated return would permit the group to deduct the interest on the $3.7 million debt from the bank’s gross income when determining the taxable income of the consolidated entity. 26 CFR § 1.1502-11 (a) (1) (1977); 26 U. S. C. § 163. The tax savings from this deduction could then be transferred to respondent as a tax-free intercorporate dividend and used to retire the acquisition debt. 26 CFR § 1.1501-14 (a) (1) (1977). Although in the absence of this transaction, the individual shareholders presumably can deduct from personal income their interest payments on the debt, see 26 U. S. C. § 163, respondent contends that approval of the transaction would have saved the bank and holding company approximately $142,000 in taxes in the first year alone. Brief for Respondent 5-6, n. 2. These tax’ savings would have diminished as interest payments on the outstanding debt declined.

       A company seeking to acquire a bank must submit an application to the Federal Reserve bank of the district in which the applicant is located. 12 CFR §§225.3 (a)-(b), 262.3 (b) (1978). The Reserve bank evaluates the application against the Board’s standards and makes a recommendation to the Board. §262.3 (c). At the “appropriate” time, the Reserve bank forwards the application to the Board so that the Board staff can undertake an independent evaluation. Ibid.

      After the application is forwarded, the Board must notify the Comptroller of the Currency if a national bank is involved, or state supervisory authorities if a state bank is involved, and in most cases must allow the agency 30 days to submit a recommendation. 12 U. S. C. § 1842 (b). See n. 12, infra. If the Comptroller or state supervisory authority recommends that the application be denied, the Board must notify the applicant and conduct a hearing. 12 U. S. C. § 1842 (b). On the other hand, if the Comptroller or state authority recommends approval of the transaction or declines to submit a timely recommendation, several Courts of Appeals have held that the Board need not provide a hearing before making its decision, see, e. g., Kirsch v. Board of Governors, 353 F. 2d 353, 356 (CA6 1965); Northwest Bancorporation v. Board of Governors, 303 F. 2d 832, 842-844 (CA8 1962), though it may choose to provide one. See 12 CFR §§262.3 (g)(2), (3) (1978). In neither case is the Board bound by the recommendation of these agencies. See Whitney Nat. Bank v. Bank of New Orleans, 379 U. S. 411, 419-420, 423 (1965). For a more complete explication of the Board’s procedures, see P. Heller, Handbook of Federal Bank Holding Company Law 317-363 (1976).

       The Board uses several measures of capital adequacy. One is the ratio of equity capital to total liabilities less cash on hand, known as the invested-asset ratio. Another is the ratio of total capital (debt and equity) to total assets, known as the capital-asset ratio. See Heller, supra n. 5, at 131-132; Clark, The Soundness of Financial Intermediaries, 86 Yale L. J. 1, 63 (1976). The Board regards an invested-asset ratio of 9%, see App. 52-53 (Board staff memorandum), and a capital-asset ratio of 8%, see Hearing on Problem Banks before the Senate Committee on Banking, Housing, and Urban Affairs, 94th Cong., 2d Sess., 137 (1976), as the minimal levels of capital necessary to maintain financial soundness. Respondent has not specifically challenged the validity of these standards as measures of bank safety.

       While the Board considers capital notes that are subordinated to depositors’ demands to be part of a bank’s overall capital, it regards them as a less desirable financial cushion than equity. See Heller, supra n. 5, at 130-131, n. 209; see, e. g., Clayton Bancshares Corp., 50 Fed. Res. Bull. 1261, 1264 (1964); Mid-Continent Bancorporation, 52 Fed. Res. Bull. 198, 200 (1966).

       The bank’s invested-asset ratio was 5.3% in 1975. The Board staff estimated that an infusion of $2.5 million in equity capital would be necessary to bring the bank up to the Board’s minimum standard of 9%. The respondent’s proposed addition of $1.1 million in equity and $1 million in debt would have raised the bank’s invested-asset ratio to only 6.8%, $1.5 million short of the minimum 9%. The additional $2.1 million in total capital would have raised the bank’s capital-asset ratio for 1975 from 5.2% to 7.4%. However, amortization of the $3.7 million acquisition debt and the $1 million in capital notes would have caused the ratio to dwindle to 5.2% by 1987, well short of the Board’s 8% minimum. App. 52-54.

       The Court of Appeals had jurisdiction to review the Board’s order pursuant to 12 U. S. C. § 1848.

       Section 329 provides that no state bank may be admitted to membership in the Federal Reserve System unless “it possesses capital stock and surplus which, in the judgment of the Board of Governors of the Federal Reserve System, are adequate in relation to the character and condition of its assets and to its existing and prospective deposit liabilities and other corporate responsibilities.” 38 Stat. 258, as amended, 12 TJ. S. C. §329.
      Section 1816 enumerates the factors to be considered in the determination whether to grant a bank federal deposit insurance coverage:
      “The financial history and condition of the bank, the adequacy of its capital structure, its future earnings prospects, the general character of its management, the convenience and needs of the community to be served by the bank, and whether or not its corporate powers are consistent with the purposes of this Act.” 64 Stat. 876, 12 U. S. C. § 1816.

       Respondent’s argument that Congress circumscribed the role of banking factors in the Board’s inquiry under § 3 by borrowing the language of the Bank Merger Act assumes that supervisory agencies applying that Act can consider such factors only as they bear upon competitive considerations. This assumption may be unwarranted.
      The House Report on the 1966 amendments to the Bank Merger Act is somewhat ambiguous regarding the weight that may be assigned to financial and managerial factors, but it does not appear to preclude consideration of those factors as independent bases for disapproval of a merger:
      “Of course, the expression of these factors in the statute would not preclude the banking agencies, charged as they are with general supervisory responsibility, from considering in any particular case such other factors as they might deem relevant. However, only the convenience and needs of the community to be served can be weighed against anticompetitive effects, with financial and managerial resources being considered only as they throw light on the capacity of the existing and proposed institutions to serve the community.” H. R. Rep. No. 1221, 89th Cong., 2d Sess., 4 (1966).
      This language speaks only to the role of financial and managerial factors in determining under 12 U. S. C. § 1828 (c)(5)(B) whether the anticom-petitive effects of a merger outweigh its benefits to the community. In this specific determination, financial and managerial resources are relevant only as they affect the assessment of those benefits. But the House Report says nothing about a situation where, as here, the merger has no anticom-petitive impact. This situation was addressed by Senator Robertson, Chairman of the Senate Committee on Banking and Currency, which was responsible for the Bank Merger Act amendments:
      “Of course, if there are no substantial anticompetitive effects and no tendency to create a monopoly and no suggestion of restraint of trade, the banking agency will proceed to consider the merger on the basis of the financial and managerial resources and future prospects of the existing and proposed institutions and the convenience and needs of the community to be served. The banking agency may approve the merger if it thinks the merger will be beneficial from these points of view, or it can turn the merger down if it thinks the merger undesirable or objectionable in any respects from these points of view.” 112 Cong. Rec. 2656 (1966) (prepared statement).
      See also id., at 2457, 2460 (“[Supervisory agencies must use the banking factors to evaluate whether or not a merger will result in a solvent and viable institution, and . . . they should not allow a merger unless this prerequisite is met”) (Rep. Todd).

       Congress has amended the Bank Holding Company Act twice since 1970, but those amendments do not affect the disposition of this case. In 1977, Congress made essentially technical refinements in the Bank Holding Company Act. These amendments permit the Board to extend further the time for a bank or a bank holding company to divest itself of bank stock acquired in the course of collecting or securing a debt. The amendments also empower the Board to dispense with the requirement that the Comptroller or state authority be given 30 days’ notice before the Board acts on an application, if more rapid action is necessary to prevent the failure of the bank to be acquired. §§ 301, 302, 91 Stat. 1388-1390, amending 12 U. S. C. §§ 1842 (a), (b). See H. R. Rep. No. 95-774, pp. 7-8 (1977).
      In 1978, Congress strengthened the Board’s regulatory powers principally by permitting the assessment of civil penalties for certain violations of the Bank Holding Company Act. § 106, 92 Stat. 3647, amending 12 U. S. C. § 1847. The 1978 amendments also authorize the Board to require a holding company to divest itself of nonbank subsidiaries whenever necessary to avoid “serious risk to the financial safety, soundness, or stability of a bank holding company subsidiary bank” or to be consistent with sound banking principles. § 105, amending 12 U. S. C. § 1844. These amendments, in particular, reflect Congress’ intent to vest the Board with authority to ensure the financial soundness of bank holding companies and their subsidiaries, a purpose entirely consonant with our interpretation of the Board's authority under § 3 (c).

       See Senate Committee on Banking, Housing, and Urban Affairs, Compendium of Major Issues in Bank Regulation, 94th Cong., 1st Sess., 379, 411 (Comm. Print 1975); Hearings on Financial Institutions and the Nation’s Economy before the Subcommittee on Financial Institutions Supervision, Regulation and Insurance of the House Committee on Banking, Currency, and Housing, 94th Cong., 1st and 2d Sess., pt. 3, p. 2403 (1976); Hearings on the Safe Banking Act of 1977 before the Subcommittee on Financial Institutions Supervision, Regulation and Insurance of the House Committee on Banking, Finance and Urban Affairs, 95th Cong., 1st Sess., pt. 3, pp. 1321, 1439 (1977).

       See n. 12, supra.

       The Board contends that the transaction would in fact weaken the capital position of the bank. Reply Brief for Petitioner 2 n. 2. The Court of Appeals found otherwise, relying on the Board’s concession during oral argument before the original panel that operation of the bank through a holding company “might in fact be financially sounder” as a result of the tax advantage. 560 F. 2d, at 263 n. 3. Because we conclude that the Board had authority to deny respondent’s application regardless of whether the transaction would weaken the bank’s capital position, we need express no opinion on this dispute.

       Among these advantages are a bank holding company’s ability to expand into banking-related activities with the Board’s approval, 12 U. S. C. § 1843 (c) (8), to avoid some state-law restrictions against branch banking, see Whitney Nat. Bank v. Bank of New Orleans, 379 U. S., at 413, and to realize substantial tax savings. See n. 4, supra. Given the applicable state law, Ill. Const., Art. 13, §8; Ill. Rev. Stat., ch. 16%, § 106 (1975), and the nature of respondent’s proposed transaction, only the last of these advantages afforded the Board leverage in this case.

       The Senate Report accompanied the Financial Institutions Supervisory Act Amendments of 1977, S. 71, 95th Cong., 1st Sess. (1977). These amendments were passed by the Senate but were not brought before the House. In the next session, Congress enacted a subsequent version of these amendments as the Financial Institutions Regulatory and Interest Rate Control Act of 1978, supra, n. 12.

       The dissent argues that because the proposed transaction would not exacerbate the financial difficulties of the bank, the Board’s disapproval rests not on the effects of the transaction, but on “pre-existing or unrelated conditions.” Post, at 255. In the dissent’s view, the Board, by looking beyond the transaction before it, attempted to exercise the day-to-day regulatory authority over banks which Congress denied to it and conferred on the Comptroller. We disagree with the basic premise of the dissent’s argument. As the Board found, the effect of this transaction would have been the formation of a financially unsound bank holding company. Thus, the Board’s attempt to prevent this effect and to induce respondent to form an enterprise that met the Board’s standards of financial soundness was entirely consistent with the language the dissent cites. Moreover, congressional concern with financial soundness and capital adequacy is by no means “irrelevant,” post, at 257, to whether the Board’s attempt exceeded its authority.

       Section 9 of the Bank Holding Company Act, 70 Stat. 138, as amended, 12 U. S. C. § 1848, provides that “[t]he findings of the Board as to the facts, if supported by substantial evidence, shall be conclusive.”

       We also find substantial evidence to sustain the Board’s determination that considerations involving the convenience and needs of the community do not support respondent’s application. Indeed, the Board previously has recognized the connection between the needs of the community and the financial well-being of a bank, holding that an applicant’s financial inability to resolve unforeseen problems could “impair [the bank’s] overall ability to continue to serve the community as a viable banking organization.” Citizens Bancorp, 61 Fed. Res. Bull. 806 (1975); accord, Downs Bancshares, Inc., 61 Fed. Res. Bull. 673, 674 (1975).

         “The Board assumes the stance that the tax advantage of bank holding company status is a reward which it may withhold until the applicant’s financial status fulfills the Board’s standard of desirability. We do not find this power or breadth of discretion in the statute.” 560 F. 2d 258, 262 (1977) (en banc).

       Section 3 (c) is quoted in the opinion of the Court, ante, at 236-237, n. 2.

       It is not disputed that the last sentence in § 3 (c) serves in part to explain the Board’s duty to analyze a transaction’s “probable effect” on the “convenience and needs of the community” and then to weigh those effects against any anticompetitive “resnlt\_s\” of the transaction. Because the statute so clearly limits the Board’s consideration to effects in that endeavor, it makes little sense to read the same sentence to give the Board broader authority in analyzing the financial and managerial aspects of the transaction apart from its anticompetitive results.
      The Board’s position is especially untenable in that the two principal concerns reflected in § 3 (c) are concentration of commercial banking facilities under a single management and the combination under single control of banking and nonbanking enterprises. These concerns, neither of which is even remotely implicated by this transaction, were described in the testimony of Chairman Martin on behalf of the Board in 1955. He thought legislation was necessary because of:
      “(1) The unrestricted ability of a bank holding company group to add to the number of its banking units, making possible the concentration of commercial bank facilities in a particular area under a single control and management; and
      “(2) The combination under single control of both banking and nonbanking enterprises, permitting departure from the principle that banking institutions should not engage in business wholly unrelated to banking. Such a combination involves the lending of depositors’ money, whereas other types of business enterprise, not connected with banking, do not involve this element of trusteeship.” S. Rep. No. 1095, 84th Cong., 1st Sess., 2 (1955).
      In the Board’s anomalous view, therefore, Congress has carefully confined the agency’s power to carry out the two primary purposes of the legislation, while leaving it with virtually unbounded authority to effectuate the statute’s secondary goal of assuring financial and managerial stability in bank holding companies.

       Although the Board decides which banks qualify for membership in the Federal Reserve System, 12 U. S. C. § 329, its day-to-day regulatory authority extends only to state member banks that are insured by the Federal Deposit Insurance Corporation. National member banks, such as respondent, are subject to the daily control of the Comptroller of the Currency. 12 U. S. C. §§ 1813 (b), (d), (h), 1818.

       To use the Court’s example, ante, at 250, if the Board is concerned with possible corruption in a national bank’s management, it may not address that problem directly by way of a cease-and-desist order or other remedies. That power resides exclusively in the Comptroller. See n. 4, supra. The Board nonetheless claims the power to require a change in management before the bank can earn a reward in the form of tax savings available through holding-company ownership — even when it concludes that the change in ownership form would in no way enhance the dangers of corrupt management and would only improve the bank’s overall situation. Having withheld the former power, I think it is illogical to assume without any proof at all that Congress intended to grant the latter.

       In the text of its opinion the Court states its intention to “decide whether the Board can only exercise [its approval] authority when the transaction would cause or exacerbate the financial unsoundness of the holding company or a subsidiary bank.” Ante, at 237. Later the Court purports to “hold that the Board may deny applications for holding-company status solely on grounds of financial or managerial unsoundness, regardless of whether that unsoundness would be caused or exacerbated by the proposed transaction.” Ante, at 252. What purports to be a broad holding, however, is significantly qualified by n. 18 which was added in response to this dissent. In that footnote the Court limits its holding to a case in which the effect of the transaction is the formation of a financially unsound bank holding company. So limited, this case involves nothing more than a dispute over whether this particular holding company was financially unsound — a dispute that hardly merits this Court’s attention. Even on this narrow ground of decision, however, I find the Court’s reasoning unpersuasive. The financial soundness of the bank is surely a matter of greater public interest than the financial soundness of its parent; yet neither the Board nor the Comptroller of the Currency has asserted any basis for requiring the bank to take any remedial action. Everyone agrees that the financial strength of the bank will be improved by the formation of a holding company and that no adverse consequences will result.