WASHINGTON — 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.
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.
Poor babies. My heart just bleeds for them. Why, it might make it even harder to throw 84-year-old widows out onto the street!
"We are worried about the effect that this ruling could have on the markets," said Rich Whiting, general counsel for the Financial Services Roundtable, a trade group representing the nation's 100 largest financial firms, in a statement. The decision "hinders the ability of financial services firms from conducting business in the United States. Even worse, it will cause confusion for consumers, especially those who move from state to state."
Oh, the markets! The sky is falling! Quick, throw the banks some money to help! Oh wait, we tried that already...
Stephen Ryan, a partner at McDermott Will & Emery, said the decision "will have a significant, negative impact on the ability of a national bank to offer a financial product uniformly throughout the country."
In a statement, Ryan, who's brought suits against state enforcement, predicted "a crazy quilt of conflicting legal instructions" and a "confusing situation of shared enforcement responsibilities for financial services."
Ha ha ha! Mr. Ryan, have you ever read the small print on an adjustable rate mortgage?
But wait, apparently it's not as bad as the banks claim:
Some of the industry's allies said yesterday's decision is hardly disastrous for banks, given that state officials will not have the power to demand documents or compel executives to submit to questioning without a court order.
"Obviously there's going to be some additional burden on the big banks," said Seth Galanter, of counsel at the law firm of Morrison & Foerster, who filed a brief on behalf of former comptrollers of the currency. "But civil litigation has always been available to private parties. This just adds state attorneys general to the list of groups that can sue."