The Supreme Court heard arguments today in a case that could change the way banks are regulated. Or rather, who regulates them as it pertains to consumer protection. This pits the Treasury Department against state attorneys general, and stunningly includes the word prophylactic.
A bit of background first. The case was prompted by Eliot Spitzer four years ago. He was New York’s AG at the time. He wondered why some national banks seemed to be making a disproportionate number of high-interest home loans to blacks and Hispanics.
Spitzer was trying to use his state’s anti-discrimination laws, but most national bank regulation is in the hands of the Treasury’s Office of the Comptroller of the Currency. Spitzer went to court and the Comptroller’s office and a group of banks sued him. Spitzer’s no longer in office, of course, but the 49 other AG’s have joined his suit. From the New York Times:
The Office of the Comptroller of the Currency, the brief states, “has no experience in enforcing state public protection laws, has a minimal track record in consumer protection, and has no accountability to the citizens of any State,” and its effort to have exclusive regulatory authority over national banks was part of “a pre-emption agenda” in recent years to take “a wrecking ball” to pro-consumer regulatory efforts.
The Comptroller’s Office argues this:
The comptroller’s office, according to the brief, works quietly with banks to address consumer issues in a “prophylactic” way, and “uses the wide range of its supervisory powers in an effort to alert national banks of potential non-compliance that poses risks to consumers and to ensure that they are addressed as early as possible.”
I don’t know if having 50 different state regulations is the answer. Some law experts say the states have done a good job policing fraud. But after what we’ve been through with the banks, I do know that I don’t want regulation to be carried out “quietly” in a “prophylactic” way by anybody.
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