(CN) – After the state of New York was ordered to stop investigating possibly discriminatory mortage practices at national banks, the U.S. Supreme Court heard arguments Tuesday over the ability of state government to enforce state law on national banks. The eventual ruling could change how national banks are regulated.
“It has so much spare time after enforcing Federal law that it’s going to be worrying about State law?” joked Justice Antonin Scalia, in reference to the Federal Government.
This “detaches the state’s power to make laws from the power to enforce them,” said New York Solicitor General Barbara Underwood. Underwood argued that legal precedent suggesting that only the federal government can enforce laws on national banks is wrong.
Underwood said there was no explicit wording in the National Bank Act of 1864 limiting enforcement authority to the federal government.
State governments can and do impose obligations on national banks, but the power to enforce those laws has been limited to the Office of Comptroller of the Currency.
The situation represents a reversal of the usual ascendance of federal law over state law.
“State law is governing law,” said Justice Ruth Bader Ginsburg. “But the only enforcer is Federal authority, and if that’s so, is there any other, in all of Federal-State relations, any other law where the State as sovereign can proscribe but cannot enforce?”
Scalia commented from the bench, “All the federal government is arguing is: We want to be the ones to enforce the separate Michigan law and the separate Hawaii law.”
Justice Stephen Breyer asked, “How is a bank to function if 50 different attorneys general plus the Federal agencies all look at the books of the bank to look at the individual loan and to make that kind of determination?” asked Justice Stephen Breyer. “They will reach a lot of different results under the same standard.”
He pointed to the situation in New York, where there were accusations of racial discrimination. Multiple enforcers would doubtlessly lead to inconsistencies, he suggested.
Minority borrowers generally have worse credit, added Breyer. “Where you make the decision as a bank to deny them the loan, it sometimes is difficult to say whether that decision was made for a discriminatory reason, namely race, or for a legitimate reason, namely because this was a person unlikely to pay the money back,” he said.
Underwood replied that there are already many areas of law where both federal and state authorities enforce federal and state mandates, and she said that such abuse could be avoided or addressed by calling a conference of state prosecuting agencies.
Arguing on behalf of the U.S., Deputy Solicitor General Malcolm Stewart of the Department of Justice argued that the Office of Comptroller of the Currency sees state enforcement as a threat, and said the manner in which Congress wrote the rules allows only the federal government to enforce rules on national banks.
He pointed to the words in legislation passed by Congress, “Those laws shall be enforced by the Comptroller of the Currency.”
“Do you agree that it is possible to read the `shall’ both as an unequivocal grant of power to OCC, but not necessarily as an exclusive ground?” asked Justice David Souter.
Because it was written in the passive voice, says Stewart, it only refers to the OCC. If it had been written in the active voice, “the Office of the Comptroller of the Currency shall enforce these laws,” then there might be more of a question, he explained.
“I don’t see any difference whatever in that regard between using the active and passive,” said Scalia.
“If you have a situation in which the OCC, say, has very limited personnel, they only have ten people in their enforcement division, for example,
WASHINGTON (CN) – After
This “detaches the state’s power to make laws from the power to enforce them,” said New York Solicitor General Barbara Underwood.
Currently, states can impose laws on national banks, but the Office of Comptroller of the Currency must enforce them.
The laws over national banks are unique because state law overrules federal law here. “State law is governing law,” said Justice Ruth Bader Ginsburg. “But the only enforcer is Federal authority, and if that’s so, is there any other, in all of Federal-State relations, any other law where the State as sovereign can prescribe but cannot enforce?”
“All the Federal Government is arguing is: We want to be the ones to enforce the separate Michigan law and the separate Hawaii law,” said Scalia, using the two states as examples to smooth out the initial confusion between the justices, where some wrongly thought the federal government intended to make law to be applied in the states, not enforce it.