Thursday, July 02, 2009
(photo: Peter A. Smith)
Hell has not frozen over. For many on the left, though, such a precursor was expected before witnessing what took place on Monday when conservative Justice Antonin Scalia joined forces with the U.S. Supreme Court’s liberal wing in a key ruling on banking regulations. In fact, Scalia not only sided with the likes of John Paul Stevens, David Souter, Ruth Bader Ginsburg, and Stephen Breyer, he wrote the majority opinion—which infuriated Wall Street—that established the rights of states to apply their own rules regulating mortgage lending by banks, even when those regulations are tougher than the federal government’s.
The case of Cuomo v. Clearing House Association began in 2005 when New York Attorney General Andrew Cuomo set out to investigate alleged racial discriminatory practices by financial institutions that provide housing loans. When his office tried to obtain private financial data, the banks sued the state of New York in federal court, and with the support of the Bush administration’s Office of the Comptroller of the Currency, won two lower court decisions before Cuomo appealed to the Supreme Court. State attorneys general from all over the country sided with New York in the case.
The Scalia-led ruling left many executives in the financial sector beside themselves, warning that allowing states to craft their own rules on mortgage lending would create a “patchwork” of regulations that would hinder the banking business. The decision “will have a significant, negative impact on the ability of a national bank to offer a financial product uniformly throughout the country,” Stephen Ryan, a partner at McDermott Will & Emery, told McClatchy Newspapers.
Meanwhile, consumer advocates were overjoyed by the ruling. “This Supreme Court decision is a victory for taxpayers, who have suffered enormously as a result of abusive business practices in all types of lending,” read an announcement by the Center for Responsible Lending, a consumer advocacy organization based in Durham, NC.
The case dovetails with efforts currently underway by the Obama administration to craft new federal rules for the financial sector. As part of creating a new Consumer Financial Protection Agency, the administration intends to establish a baseline of regulations for banks to follow, while allowing states to impose their own, tougher rules.
-Noel Brinkerhoff
Scalia Breaks Ranks, Slams Bush Officials on Bank Regulation (By Kevin G. Hall, McClatchy Newspapers)
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