Causes, Consequences and Implications for Reform
Edited by Lawrence E. Mitchell and Arthur E. Wilmarth, Jr
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
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.* 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...
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