Court puts bank regulation in federal hands
TESS VIGELAND: Today the nation’s banks got some good news from the U-S Supreme Court.It ruled states cannot make their own regulations for bank subsidiaries. From Washington, John Dimsdale reports the five to three decision is a blow for states.And consumer groups are worried that customers could lose some of their protections from predatory lending practices.
JOHN DIMSDALE: This case started in 2003 when Michigan instructed the country’s fourth-largest bank, Wachovia, to register its mortgage lending subsidiary with the state financial services commission. Wachovia refused, saying that as a national bank, it wasn’t bound by state regulations. Today the Supreme Court agreed — Much to the relief of Richard Whiting of the Financial Services Roundtable representing big banks.
RICHARD WHITING: This is a very welcome decision on behalf of the industry. It clarifies that national banks can conduct business on a national basis without having to have the complexity of dealing with a multitude of state laws.
National bank subsidiaries have been growing in number and offering more financial services, from mortgages to used car lending to Medicare counseling. Consumer groups, including the AARP, joined the states in arguing against federal preemption.
Jane D’Arista at the Financial Markets Center says state regulators have traditionally done a better job of keeping banks in line.
JANE DARISTA: I’m torn between my notion that it should be a good thing to have a single regulator at a national level and my recognition that, pragmatically, having a diligent state regulator is a much better bet.
For example, D’Arista says it was state investigations that uncovered the cozy relationship between student lenders and college financial aid counselors. When it comes to banks, she says, two regulators are better than one.
In Washington, I’m John Dimsdale for Marketplace.
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