The Panic of 2008

The Panic of 2008

Causes, Consequences and Implications for Reform

Edited by Lawrence E. Mitchell and Arthur E. Wilmarth, Jr

The Panic of 2008 brings together scholars from a variety of disciplines to examine the causes and consequences of the global credit crisis, the subsequent collapse of the financial markets, and the following recession. The book evaluates the crisis in historical context, explores its various legal, economic, and financial dimensions, and considers various possibilities for reform. The Panic of 2008 is one of the first in-depth efforts to study the crisis as it was in the very earliest stage of resolution, and establishes a foundation for thinking about and evaluating current reform efforts and the likelihood of recurrence.

Chapter 12: Cuomo v. Clearing House: The Supreme Court Responds to the Subprime Financial Crisis and Delivers a Major Victory for the Dual Banking System and Consumer Protection

Arthur E. Wilmarth Jr.

Subjects: economics and finance, financial economics and regulation, law - academic, finance and banking law


Arthur E. Wilmarth, Jr.* INTRODUCTION In Cuomo v. Clearing House Ass’n, L.L.C.,1 the Supreme Court held that the Office of the Comptroller of the Currency (OCC) exceeded its authority when it adopted a regulation (12 C.F.R. § 7.4000) that prohibited state officials from filing lawsuits to enforce applicable state laws against national banks. The Court upheld the OCC’s regulation only to the extent that it bars state authorities from bringing administrative enforcement proceedings against national banks. Thus, the Court drew a clear distinction between ‘administrative oversight’ of national banks by state officials – which the Court viewed as preempted by the National Bank Act (NBA) – and ‘judicial enforcement actions’ against national banks by state officials, which the Court found to be consistent with the NBA and the Court’s prior decisions.2 Cuomo arose out of an attempt by the New York Attorney General (NYAG) to enforce New York’s fair lending laws against several large national banks that were heavily engaged in nonprime mortgage lending. By affirming New York’s authority to enforce its fair lending laws against national banks through the courts, the Supreme Court exhibited a perspective on banking regulation that sharply contrasted with the Court’s approach only two years earlier in Watters v. Wachovia Bank, N.A.3 In Watters, the Court upheld another OCC regulation (12 C.F.R. § 7.4006), which preempted the application of state laws to nonbank mortgage lending subsidiaries of national banks. 295 M2379 - MITCHELL PRINT.indd 295 20/9/10 11:09:44 296 The panic of 2008 Watters took a broad...

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