June 29, 2009
Reaction to Cuomo v. Clearing House Ass'n
Posted by David Zaring

Today, the Supreme Court decided to permit states to police banks for discrimination in mortgage lending in the teeth of some statutory language that looked pretty preemptive, and a regulation that banned them from trying.  As Scotusblog explained:

The National Bank Act (”NBA”), 12 U.S.C. § 484(a), provides that “[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof.” In 2004, the Office of the Comptroller of the Currency (”OCC”) issued 12 C.F.R. § 7.4000, which interpreted Section 484(a) to preempt state enforcement of state laws against national banks.

The Court held that the reg was invalid.

  • There's a federal regulatory competition angle here.  OTS, the maligned, soon-to-be-closed thrift regulator, has always had broad preemptive powers and has used them.  OCC has been trying to catch up, because regulated industry prefers to deal with only one federal regulator, as opposed to 51.  This is a setback for that effort to equalize things, and because OTS is going away, unless Congress amends the bank statute in the impending reform legislation, the states will remain players in issues involving enforcing state anti-discrimination, perhaps consumer protection, and other statutes that affect the business of banking without (in theory) interfering with federal regulation of it.
  • The test announced is one of those that always get conservatives into problems - distinguishing between very similar powers: "The critical question is not what is being compelled, but what sovereign power has been invoked to compel it. And the power to enforce the law exists separate and apart from the power of visitation."  So visitation can be preempted, but law enforcement cannot.  If the AG issues a subpoena, that's okay; if the AG sends over investigators, that is not. 
  • Note the distinction with the last preemption case, which the OCC won: "Watters held that a State may not exercise “‘general supervision and control’” over a subsidiary of a national bank, 550 U. S., at 8, because “multiple audits and surveillance under rival oversight regimes” would cause uncertainty, id., at 21. “[G]eneral supervision and control” and “oversight” are worlds apart from law en-forcement."
  • Some people think that the Court punishes the executive for failing to deliver a healthy economy by ruling against it in recessions.  See this paper by Epstein et al.  I'm hugely unconvinced, but it would be easy to see this as a setback to the federal regulatory scheme made in response to the current unpleasantness, and the failure of federal regulators to stop abuses in the subprime mortgage market.  You won't see any language about that in the opinion, though.
  • Scalia is the swing vote on this.  Can he really take federalism seriously?  Feeley and Rubin have plausibly argued that federalism values are always abandonded in the end for the sake of reality, as the four conservative justices have done here.  Scalia's opinion, however, is replete with paeans to sovereignty, and the liberal justices are silently happy to go along, apparently.

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