SLABBED Daily – July 1

A McClatchy story on Monday’s Supreme Court decision on Cuomo v. Clearing House Association jolted me back into the SLABBED Daily routine: h/t Sun Herald

In a rebuke of the Bush administration, the Supreme Court ruled Monday that a federal bank regulator erred in quashing efforts by New York state to combat the kind of predatory mortgage lending that triggered the nation’s financial crisis.

The 5-4 ruling by the high court was unusual. Justice Antonin Scalia, arguably the most conservative jurist, wrote the majority’s opinion and was joined by the court’s four liberal judges. (emphasis added)

Can you believe it?

The five justices held that contrary to what the Bush administration had argued, states can enforce their own laws on matters such as discrimination and predatory lending, even if that crosses into areas under federal regulation.

Justice Clarence Thomas, writing for the four dissenters, argued that laws dating back to the nation’s founding prevent states from meddling in federal bank regulation. He was joined by Chief Justice John G. Roberts and justices Anthony Kennedy and Samuel Alito.

The ruling angered many in the financial sector, who fear it’ll lead to a patchwork of state laws that’ll make it harder for banks and other financial firms to take a national approach to the marketplace…

At issue in Cuomo v. Clearing House Association is whether the Office of the Comptroller of the Currency, the chief regulator of national banks, erred in shutting down New York’s efforts to question banks about predatory lending practices.

The OCC convinced lower courts that then-New York Attorney General Eliot Spitzer had overstepped into federal territory when he sought non-public information about the lending practices of federally regulated banks. Forty-nine states joined New York in appealing the lower court ruling.

While siding with the states, the Supreme Court ruling clarified that they can’t issue their own subpoenas and instead must pursue enforcement action through courts.

“An attorney general acting as a civil litigant must file a lawsuit, survive a motion to dismiss, endure the rules of procedure and discovery, and risk sanctions if his claim is frivolous or his discovery tactics abusive,” Scalia’s opinion said. (Discovery is the pre-trial phase in which each party in a case can seek documents and other evidence from the other.)

The Bush administration argued that it had to the right to pre-empt any state effort to regulate. But after winning that argument, the OCC failed to address the issues of predatory lending that Spitzer, and later his successor Andrew Cuomo, sought to address.

The finance folks said the decision will cause confusion for consumers, especially those who move from state to state; but, Consumer advocates were elated.

“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,” said the Center for Responsible Lending, a consumer advocacy organization based in Durham, N.C. “This decision will help to restore confidence in the financial services industry and the national economy.”

Makes you wonder, does it not?