Some cheery news from beyond New York State borders! The Supreme Court has ruled 5-4 that state attorney generals have the right to investigate nationally-chartered banks for violating consumer protection laws.
NY AG Andrew Cuomo wanted to see if national banks were engaging in discriminatory practices by funnelling minorities into dangerous sub-prime loans. Fannie Mae estimates that more than half of sub-prime borrowers qualified for prime loans; many were minorities suffering under redlining practices. The map…shows the distribution of foreclosures in New York City; foreclosures are most dense where minorities are concentrated, in large part because of these practices.
But when Cuomo tried to look into the problems, the banks told him that their national regulator preempted any state efforts to monitor their business. Since the national regulator, the OCC, didn’t really do much at all, it was licensce to behave poorly. But now the OCC is set to be shuttered under the Obama administration’s financial regulation plan, and Cuomo has free reign to protect the consumers of his state thanks to the Supreme Court.
It’s great to see New York public officials making an impact like this on a national scale. Earlier this year, a “Credit Cardholder’s Bill of Rights” passed the U.S. House, and it was sponsored by New York Representative Carolyn Maloney.
Rock!
Supreme Court: Banks Can’t Hide Behind National Law – TAPPED
This all comes from a case argued by NY AG Andrew Cuomo, crusading as always — what do they give those New York AGs to drink up there, anyway? Answer: An incredible jurisdiction and a huge media spotlight. Cuomo wanted to see if national banks were engaging in discriminatory practices by funnelling minorities into dangerous sub-prime loans. Fannie Mae estimates that more than half of sub-prime borrowers qualified for prime loans; many were minorities suffering under redlining practices. The map to the right (click for a larger version) shows the distribution of foreclosures in New York City; foreclosures are most dense where minorities are concentrated, in large part because of these practices.
But when Cuomo tried to look into the problems, the banks told him that their national regulator preempted any state efforts to monitor their business. Since the national regulator, the OCC, didn’t really do much at all, it was licensce to behave poorly. But now the OCC is set to be shuttered under the Obama administration’s financial regulation plan, and Cuomo has free reign to protect the consumers of his state thanks to the Supreme Court. Good stuff! This is part of a general trend in government against federal preemption; the administration is trying to make consumer protection laws into a floor, not a ceiling, and with this decision — with the ever-Federalist Antonin Scalia joining the court’s four liberals — we have some judicial confirmation of the strategy.
Too bad that New York’s government is so slow moving and bureaucratic.