Court: AG Must Go to Court to Probe Nat'l Banks

By Staff | June 29, 2009 | 12:35 PM EDT
Washington (AP) - The Supreme Court said Monday that state attorneys general can investigate national banks for discrimination and other crimes, but only with a court's help.
The high court ruled that a state attorney general cannot on his own issue a subpoena against a bank that has branches in that state and others. However, the court said national banks are subject to some state laws under the National Banking Act, and an attorney general can go to court to enforce those laws.
"What this decision today says is that states have the ability to enforce their own laws (against national banks) as long as they follow state due process procedures, which generally mean issuance of a subpoena which can be challenged in court," said lawyer John Cooney, a former assistant solicitor general and deputy general counsel at the Office of Management and Budget.
The state of New York wanted the Supreme Court to overturn a federal appeals court decision that blocks states from investigating the lending practices of national banks with branches within its borders. It was supported by the other 49 states.
Eliot Spitzer, then New York's attorney general, wanted to investigate whether minorities were being charged higher interest rates on home mortgage loans, a practice that is prohibited under various state and federal laws. But federal judges said Spitzer could not enforce state fair-lending laws against national banks or their operating subsidiaries by issuing subpoenas and bringing enforcement actions against them.
"Here, the threatened action was not the bringing of a civil suit, or the obtaining of a judicial search warrant based on probable cause, but rather the attorney general's issuance of subpoena on his own authority," said Justice Antonin Scalia, who wrote the opinion for the court. "That is not the exercise of the power of law enforcement 'vested in the courts of justice,'" which the National Banking Act allows.
Both the Clearing House Association, which represents the banks, and the comptroller said the attorney general was interfering with the federal government's supervisory powers.
Edward L. Yingling, president and chief executive officer of the American Bankers Association, said he was disappointed with the court's decision.
"Without a uniform regulation and enforcement of the laws that apply to national banks, which often includes state law, those institutions will face a patchwork of duplicative and conflicting federal and state regulation and enforcement actions," he said. "This will make it difficult to serve consumers in today's hi-tech, mobile society where people and bank services move constantly across state lines."
The 2nd U.S. Circuit Court of Appeals in New York City had ruled that the responsibility for such investigations rests with the Office of the Comptroller of the Currency, a part of the Treasury Department, and other federal agencies.
"Channeling state attorneys general into judicial law-enforcement proceedings (rather than allowing them to exercise 'visitorial' oversight) would preserve a regime of exclusive administrative oversight by the comptroller while honoring in fact rather than merely in theory Congress's decision not to pre-empt substantive state law," Scalia said.
Chief Justice John Roberts, and Justices Clarence Thomas, Samuel Alito and Anthony Kennedy dissented in part, saying they would have ruled with the New York-based appeals court.
The case is Cuomo v. The Clearing House Association, 08-453.
The Supreme Court said Monday that state attorneys general can investigate national banks for discrimination and other crimes, but only with a court's help.