A decision by the Supreme Court last week upholding an Arizona law imposing harsh penalties on businesses that hire illegal immigrants could foreshadow a serious regulatory headache for national banks that have local mortgage lending subsidiaries.
The majority opinion, written by Chief Justice John G. Roberts on behalf of the court’s five more conservative members, said that Arizona was allowed to add much tougher state penalties to those contained in a 1986 federal immigration law. In legal terms, the court held that federal law did not “pre-empt” the states from enacting and enforcing local licensing laws when it comes to employing illegal immigrants.
In reaching this conclusion, the majority opinion rejected the argument that Congress intended the federal system to be exclusive.
“Implied preemption analysis does not justify a ‘freewheeling judicial inquiry into whether a state statute is in tension with federal objectives;’ such an endeavor ‘would undercut the principle that it is Congress rather than the courts that preempts state law,’” the opinion declared, quoting past cases.
So what does this have to do with banking regulation?
The narrow reading of preemption in this case may undercut a broader reading the Supreme Court gave in 2006 to pre-empt a broad reading under the National Banking Act. That case was decided by a vote of 5-3, with Justice Clarence Thomas sitting out because his son and daughter-in-law worked for the bank in question.
The contest in the banking case was whether states could regulate the state chartered subsidiaries of nationally chartered banks. The state subsidiaries are used by national banks to make mortgage loans, auto loans, small business loans and provide investment advice.
Any opinions? And is it normal for them to undercut rulings made that recently? Is this sloppy, just make shit up to fit the ideology/right wing need du jour, or can these rulings both be correct?
beltane
I haven’t read either decision but it is entirely possible that both rulings are incorrect.
dr. bloor
Basically, it doesn’t matter if either or both of those rulings are incorrect. The SCOTUS has been operating on the Humpty Principle ever since Bush v. Gore.
Han's Solo
Don’t get to thinking that SCOTUS bases it’s decisions on pre-existing legal decisions. That is so pre Bush V Gore.
Nowadays decisions are based upon what wingnuts want. Full stop.
Just Some Fuckhead
It should be pretty obvious by now that right wing court opinions are decided based on the desired outcome.
Yossarian
@Just Some Fuckhead: In fairness, that could describe just about all Court decisions, regardless of ideology.
West of the Cascades
My reflex is to think it’s all ad-hoc decisionmaking (given the ideological makeup of the current Court), but the conceivable principled way that they could be harmonized is based on differences in the sets of laws at issue. But given that immigration law is usually an exclusively federal area, (whereas regulation of banking has long been a shared federal/state responsibility), I would have objectively predicted the outcomes of these cases to have been flipped in terms of where you’d expect broad preemption of state law (immigration) and narrow preemption (banking).
Caveat that I haven’t read either case and it’s been a loooong time since I’ve done any work on preemption issues (and then it’s usually been in the environmental law field).
FormerSwingVoter
This doesn’t make the slightly left-ish Justices look good either; they appear to have switched to the other side as well.
Howlin Wolfe
In keeping with manufacturing “knowledge” at the various Institutes for the Foregone Conclusion, the SCOTUS has adopted the reverse engineering of arguments prevalent at the wingnut welfare-funded “think” tanks to come up with their outcome-based opinions and decisions.
Lurker 2.0
I always hated con law and my Interstate Commerce Clause Fu is weak. But I can see how an intellectually consistent court could come to different decisions. (this of course, does not mitigate the potential for blatant hackery).
Zifnab
Strange how they didn’t feel the same way about the EPA when California tried to crank up regulations on greenhouse gases.
IrishGirl
It’s just sloppy right-wing ideology bullshit. They’re setting themselves up to allow SB1070. Bunch of r*tf*ckers.
Culture of Truth
Sure they could both be correct. One may call it undercutting, or simply clarifying.
Businesses generally love preemption, so if this is the “issue du jour” it seems to me it’s a Culture War issue, not a Big Business one.
El Cid
The Vampire Squid in the Desert.
KG
Haven’t read the decisions, so going entirely off of the block quote in the post, but the best of my lawyering skills says that the Court probably looked at these as separate issues. You can have preemption in one area of law but not others. If the issue in the immigration law case was framed as “do state and local governments have the right to impose laws that would require denial of business licenses or revocation of said licenses in the event that a business was found to be employing undocumented workers?” then that decision may well have been right. In the banking case, my guess is the calculus changes if you’re dealing with state chartered banks that are selling loans across state lines, and how much independence they have from the mothership, and all that kind of stuff.
So, final analysis without reading either opinion: they could both be right, both be wrong, or one could be right and one could be wrong.
KG
@El Cid: does that mean NATO can bomb Goldman Sachs?
trollhattan
@KG:
One can only hope.
danimal
@KG:
Finally, a military action I can back without any reservations whatsoever.
eemom
I offered my opinion on this decision last week. In layman’s terms, I said it sucks.
Breyer’s dissent tells you all you need to know. It is a grotesque departure from standard preemption analysis. This is one where I really can’t see any other explanation than result-oriented.
ETA: I haven’t read the 2006 decision so I don’t know about the “reconciling” part.
kth
In the rare cases in which the Republican justices are required to choose between corporate interests and the political interests of the Republican party, they will generally side with the latter. Not that they are more loyal to the GOP than to big business and the wealthy, but because maintaining and facilitating Republican power is critical to the project of warping democracy to the advantage of business and the wealthy.
mb
Buried lede: Clarence Thomas recuses himself. Didn’t know he had it in him.
harokin
I really shouldn’t get out of the boat, but…
When none of the justices, on the majority or dissents,even mention the Bank Act opinion (which was actually decided in 2007), one would normally assume that the opinions have nothing at all to do with each other and that the quoted column is way off the mark.
In support of Culture of Truth’s post at 12, it’s worth mentioning that the losing party in the Arizona case was the right wing U.S. Chamber.
Jonny Scrum-half
I didn’t read the opinions word-for-word, but I did look at both of them. The recent immigration decision appears to be based on the fact that Congress, in its immigration laws, specifically exempted from pre-emption State sanctions based on licensing. I didn’t see anything like that in the earlier, banking, case.
eemom
@Jonny Scrum-half:
No, it didn’t. If it were that clear cut it wouldn’t have made it anywhere near the Supreme Court, much less produced a split decision.
Keep that brilliance coming, though. We need more of it around here.
eemom
@harokin:
Agree.
mclaren
A general legal principle applies to all higher court rulings: disregard all precedents, logic, legality, common sense and common human decency if the end result increases the net amount of injustice and human suffering.
AAA Bonds
@harokin:
What is up with that story that it never gains traction – how immigration won’t move because employers like things how they are?
dmbeaster
A few details on the legal question here. Federal preemption is an important doctrine of law subject to a lot of perniciousness, since it becomes a device to use the Federal government to prevent states from acting on a given subject.
There are two basic types of preemption – express and implied. Express is pretty simple – Congress passes a law and explicitly says it is barring state regulations on the subject (there are various ways it can say this). Implied is where it can get slippery – Congress is frequently sloppy (or Congress intentionally avoids the question to get the law passed) and it is unclear whether or not the Federal law is intended to be exclusive. One basic criteria is that federal law so occupies the field that state law cannot realistically fit into the scheme, and is therefore impliedly preempted.
Most of the ideology driven decision-making involving preemption arises with implied preemption, since it is a judgment call and can be affected by the subject that is being regulated. A recent example of litigation on this was that allegedly federal mandated prescription drug warnings preempted state tort law concerning drug company liability for inadequate warnings (Wyeth v. Levine, 2009, no preemption was found, though Roberts, Alito and Scalia dissented).
What was ugly about this case was that Congress was 100% clear about preempting the field of penalties for employers – the conservative majority had to stand all logic on its head to allow the states to add further punishments to the federal ones. That was the basis for the dissent – that the opinion simply could not be reconciled with settled law. The case is a good example of the bad law resulting from right wing judicial activism.
dmbeaster
And banksters wont be affected because there is no way the conservatives are going to apply the same logic to federal banking law.
Cliff in NH
http://www.realtor.org/library/library/fg721
Field Guide to Federal Banking Regulator Preemption Rules
(Updated September 2006)
On January 7, 2004, the Office of the Comptroller of the Currency (OCC) issued a final rule identifying types of state laws that are preempted for national banks, including mortgage lender/broker licensing laws, escrow account laws, credit score disclosure laws, and anti-predatory lending laws. In addition, the OCC has reserved for itself enforcement of all rules against national banks and their operating subsidiaries. State regulators no longer have authority to pursue wrongdoing in this area against these entities. This page presents information from NAR, the OCC, and others about the preemption rules and what they may mean for REALTORS® and consumers. (F. Heller, Manager, Virtual Library & Archives)
Cliff in NH
http://www.nteu274.org/preempt.htm
SENATE BANKING COMMITTEE SCRUTINIZES, QUESTIONS OCC PREEMPTION RULE
Room 538 in the Senate Dirksen Building drew a standing room only crowd Wednesday afternoon as Comptroller of the Currency John D. Hawke Jr., was called upon to defend his decision to shield national banks and their operating subsidiaries from compliance with most state banking laws. The hearing was divided into two panels, with Comptroller Hawke, North Carolina Attorney General Roy Cooper, and Idaho Director of Finance Gavin Gee on the first panel. Cooper testified on behalf of the National Association of Attorneys General, and Gee spoke for the Conference of State Bank Supervisors.
Following the Comptroller’s opening statement, Committee Chairman Richard Shelby (R-Ala.) posed the first in a series of hard-hitting questions and comments about the OCC’s decision-making process and timing. Sen. Shelby asserted, “Shouldn’t preemption be done by Congress?” Hawke responded that the Constitution granted him the authority to act.
In his opening statement, Ranking Member Paul Sarbanes (D-Md.) said, “Let me state at the outset that I am opposed to the actions of the OCC. Last November, I joined in a letter with my Democratic colleagues on the Banking Committee in which we urged the OCC to defer any further rulemaking on the preemption of state laws at that time and, instead, to examine vigorously claims of predatory lending and other violations of state consumer protection laws by national banks and their operating subsidiaries.”
“The OCC’s preemption analysis is one-sided and self-serving. The OCC has paid little deference to well-established history and precedent that has allowed the States and the OCC to coexist in a dual regulatory role for over 130 years. That precedent has upheld this nation’s policy that national banks are subject to state laws unless the state laws significantly impair the national bank’s powers created under federal law. The OCC is destroying that careful balance by finding ‘significant interference’ or ‘undue burden’ whenever state law has any effect on a national bank,” Sarbanes added.
..snip..
Cliff in NH
http://www.pirg.org/consumer/pdfs/mierzwinskiarticlefinalnysba.pdf (pdf)
PREEMPTION OF STATE CONSUMER LAWS: FEDERAL
INTERFERENCE IS A MARKET FAILURE
By Edmund Mierzwinski
In January 2001, President-elect George W. Bush told a gathering of governors, “While I
believe there’s a role for the federal government, it’s not to impose its will on states and
local communities.” But on a growing number of issues, powerful special interests are
persuading Congress and the White House to do just that. When it comes to consumer
protection and the environment, they’re imposing federal law while wiping out the states’
ability to pass stronger standards.
In December, the President signed the Fair and Accurate Credit Transactions (FACT)
Act,1 a major law derived from numerous recent state privacy, credit reporting, and
identity theft initiatives. Its price, however, was unacceptable: Congress permanently
restricted states from enacting most future laws in the area. Then, in January, a
previously obscure federal banking regulator—the little-noticed Office of the
Comptroller of the Currency (OCC)—eliminated application of all state consumer
protection and predatory lending laws, as well as state enforcement authority, over
national banks, even when no federal law protected consumers at all.
Congress and the executive branch, backed by the courts, have failed to learn what may
be the most important lesson of the federalist system: competition for public policy ideas
fosters accountability. A marketplace of public policy ideas is no different than a
marketplace of consumer products—when you have only one seller, you have a
monopoly. A monopoly of ideas is a market failure that leads to bad public policy.2
Congress rarely acts to protect consumers unless the states act first, unless there is a
scandal. Even the epic Enron scandal didn’t guarantee passage of a corporate reform law
in 2002. Without the follow-on WorldCom scandal, the accountants and Wall Street
would have blocked significant reforms.3 We cannot wait for more scandals; we need to
ensure that the states remain as sellers in the marketplace of ideas. And, of course, the
states, led by New York Attorney General Eliot Spitzer and Massachusetts Secretary of
State William Galvin, have also shown the U.S. Securities and Exchange Commission
(SEC) the way when it comes to fighting investment and mutual fund scandals.
I. THE OCC TAKES THE FIELD, WANTS NO TEAM AGAINST IT
It’s easiest to win when you have no opponents. In January 2004 the Treasury
Department’s OCC4 issued two related and sweeping rules, one preempting nearly all
consumer laws and the other restricting nearly all enforcement powers of states. The
OCC asserted it had authority to take the field over virtually all matters pertaining to
national banks, even when no federal law protected consumers from unfair or predatory
financial practices.
..snip..
Cliff in NH
And what happened to him thanks to unlimited wiretapping?
Cliff in NH
http://www.rense.com/general81/why.htm
..snip..
Why The Attack Now?
Spitzer had become increasingly public in his blaming the Bush Administration for the nation’s current financial and economic disaster. He testified in Washington in mid-February before the US House of Representatives Financial Services subcommittee on the problems in New York-based specialized insurance companies, known as “monoline” insurers (monoline Versicherung). In a national TV interview the same day, he laid blame for the crisis and its broader economic fallout on the Bush Administration.
Spitzer recalled that several years ago the US Office of the Comptroller of the Currency went to court and blocked New York State efforts to investigate the mortgage activities of national banks. Spitzer argued the OCC did not put a stop to questionable loan marketing practices or uphold higher underwriting standards.
“This could have been avoided if the OCC had done its job,” Spitzer said in the interview. “The OCC did nothing. The Bush Administration let the housing bubble inflate and now that it’s deflating we’re dealing with the consequences. The real failure, the genesis, the germ that has spread was the subprime scandal,” Spitzer said. Fraudulent marketing and very low “teaser” mortgage rates that later ballooned higher, were practices that should have been stopped, he argued. “When mortgages are being marketed, there is a marketplace obligation to ensure the borrower can afford to pay back the debt,” he said.
That TV interview was only one instance of Spitzer laying blame on the Bush Republicans. On February 14, Spitzer published a signed article in the influential Washington Post titled, “Predatory Lenders’ Partner in Crime: How the Bush Administration Stopped the States From Stepping In to Help Consumers.”
That article appeared the day after his ill-fated tryst with the prostitute at the Mayflower Hotel. Coincidence? Spitzer wrote, “”In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act pre-empting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks.”
In his article Spitzer charged, “Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which he federal government was turning a blind eye.” Bush, said Spitzer right in the headline, was the “Predator Lenders’ Partner in Crime.” The President, said Spitzer, was a fugitive from justice. And Spitzer was in Washington to launch a campaign to take on the Bush regime and the biggest financial powers on the planet. Spitzer wrote, “When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners the Bush administration will not be judged favorably.”
With that article, some Washington insiders believe, Spitzer signed his own political death warrant.
Cliff in NH
http://lawprofessors.typepad.com/banking/2011/05/occ-interprets-dodd-frank-preemption-provisions-but-are-they-correct.html
May 17, 2011
OCC Interprets Dodd-Frank Preemption Provisions — But Are They Correct?
Acting Comptroller of the Currency John Walsh sent a letter dated May 12, 2011, to Senator Thomas Carper outlining the OCC’s interpretation of Dodd-Frank preemption provisions.
1. The OCC recognizes that it must amend its regulations to accord with the lack of federal preemption now available to operating subsidiaries, agents, and affiliates of national banks.
2. Preemption standards for federal thrifts must now be the same as those for national banks.
3. Dodd-Frank specifically incorporates the preemption standard articulated in 1996 by the U.S. Supreme Court in Barnett Bank of Marion County v. Nelson, providing that state consumer financial protection law that “prevents or significantly interferes with the exercise by the national bank of its powers” will be preemption. This is strict “conflict preemption” language rather than “field preemption.” The OCC, however, opines that Congress intended for the OCC to adopt not only the quoted preemption standard, but the Barnett case analysis in its entirety. The OCC will remove from its regulation the phrasing of the standard that state laws will be preempted when they “obstruct, impair, and condition” the exercise of national bank powers.
4. The OCC reaches the disingenuous conclusion that Congress did not intend to repeal the OCC’s 2004 regulations that used the language “obstruct, impair, and condition” rather than the Barnett language “prevents or significantly interferes with” in setting forth the standard for determining when state laws would be preempted.
5. Dodd-Frank provides that state attorneys general may sue national banks in court to enforce non-preempted state laws — and the OCC agrees to amend its regulations to incorporate this aspect of Dodd-Frank and the U.S. Supreme Court opinion in Cuomo v. Clearing House (2009). Such state action is not a violation of OCC’s exclusive visitorial powers.
(ag) May 17, 2011, in Federal Preemption
Cliff in NH
@Cliff in NH:
Also Edwards from the same link:
RESOLUTION OF DISAPPROVAL ON OCC PREEMPTION RULE INTRODUCED BY SEN. EDWARDS
Sen. John Edwards (D-N.C.) announced Wednesday that he will introduce a joint resolution to strike down the Office of the Comptroller of the Currency’s national bank preemption rule.
“The resolution that I am introducing today would strike down the OCC rules that preempt state law. It would restore states’ ability to enforce their predatory lending laws within their boundaries and protect their homeowners against abusive loans,” he said.
In introducing the resolution, Sen. Edwards referenced North Carolina’s passage of a model state law against predatory-lending practices in 1999. “I am proud that my state of North Carolina is a leader in fighting predatory lending. The strong law it passed in 1999 is saving consumers $100 million a year, while mortgage credit remains widely available,” he said.
Senator Edwards favors enacting strong federal rules against predatory lending. “We need a strong national law to fight predatory lending. We don’t need weak national rules and a prohibition of the strong state laws now on the books,” he said.
Cliff in NH
@Cliff in NH:
Of course it’s Soooo much more important that he fucked someone who wasn’t his wife.
Norwonk
This is entirely off topic, and I apologize, but I just got stuck at this sentence:
So there are in fact situations where Clarence Thomas does the honourable and ethical thing? Wow. I wonder what happens when he gets a case about the individual mandate his wife has been fighting so hard against?
The Tim Channel
Good thing I’m old enough not to give a rat’s ass anymore. None of this banking madness is going away without somebody going to jail as an example. That’s not likely since the laws that brought on the calamity (however weak they are/were) haven’t changed.
Same thing with torture btw. It’s here to stay, and will become an important tool in law enforcement someday soon in the future. Count on it. We cannot let the scourge of these pot-heads go on forever. For the sake of the children, we’re gonna have to get REALLY hardcore. Sarcasm, or a premonition of a sample of Sarah’s next stump speech?
Enjoy.
dmbeaster
@Norwonk:
I believe that he has already indicated that he will not recuse himself. Kagan has already recused herself for other reasons.
Pococurante
@dmbeaster:
One wonders why she is on the bench at all…