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The Supreme Court, in an opinion authored by Justice Antonin Scalia, ruled that the OCC ban on states enforcing their own banking laws against a national bank was not a reasonable interpretation of the National Bank Act’s “visitorial powers” provision. After analyzing the history of the concept of “visitorial powers” and the Court’s own precedents, the Supreme Court held that a lawsuit by a state to enforce its own laws did not fall within the ambit of the “visitorial powers” reserved to the federal authorities. The Court noted that it had already held that the National Bank Act does not prevent states from passing laws applicable to national banks in the first place. Allowing a state to enact a fair lending law but not to enforce that same law would lead to the “bizarre” result where “the bark remains, but the bite does not.”
Chalk this up as another sad might-have-been from the days of Eliot Spitzer — but this is a case where Spitzer’s failure was caused not by his own flaws, but by the meddling of Bush administration officials whose relationships with the businesses they were supposed to be regulating mirrored the swinish behavior that ended Spitzer’s political career.
The U. S. Supreme Court ruled last week that the federal government was wrong to stop then-Attorney General Spitzer from seeking information about whether banks in New York, even those with federal charters, were engaging in questionable practices in the way they issued mortgage loans.
Had Spitzer been allowed to follow up his suspicions, there is some chance that the current economic recession, triggered by the collapse of the same kind of bad loans that he was investigating, might have been prevented. At least the previously somnambulant federal officials might have had some clue as to what was coming.
Spitzer’s case, since taken up by Attorney General Andrew M. Cuomo, was based on evidence that lenders in New York were directing black and Hispanic borrowers into high-rate mortgages at a disproportionate rate compared to white homebuyers.