Preemption Extends to Subsidiaries Says US Supreme Court

Big news about preemption from the US Supreme Court! This is news that is sure to make Eliot Spitzer, New York's new Governor, spittin' mad! Siptzer, as NY's Attorney General, was an aggressive advocate for allowing the state to regulate banks operating in NY, even though the bank may have been a subsidiary of a national bank. The feds and the national banks, on the other hand, wanted the preemption doctrine to control, which would mean they could operate under one set of rules and regulations (federal law) versus state rules and regulations which vary dramatically from state to state.

The feds and national banks won.

From Tony Mauro of the Legal Times: "By a 5-3 vote in Watters v. Wachovia Bank, the Court found that the National Banking Act pre-empts state regulation of banks -- and that the pre-emption extends to their subsidiaries, which the Court said are 'equivalent' to the national banks themselves."

Consumer advocates say this is a bad decision and will hurt consumers because it takes away the state's power to protect its own citizens. On the other hand, national banks and their subsidiaries will be able to operate more efficiently and spend less on compliance costs if they have one set of rules and regulations to follow instead of up to 50. Does that mean national banks and their subsidiaries will pass the savings on to the consumer? That remains to be seen.

Full article: http://www.law.com/jsp/article.jsp?id=1176800654949