The Supreme Court delivered its decision in Cuomo v. the Clearing House Association today. The issue in the case was whether the a regulation passed by the Office of the Comptroller of the Currency (OCC) preempted state enforcement of state fair lending laws against national banks. Coming on the heels of the OCC's victory in Wachovia v. Watters, in which the Supreme Court held that a state could not exercise visitorial powers over an operating subsidiary of a national bank, many thought that the Supreme Court would extend the OCC's power to near complete preemption of any state authority over national banks. To the surprise of many observers, however, the Court ruled 5-4 (Thomas, with Roberts, Kennedy, and Alito dissenting) in favor of the State of New York (Cuomo).
Tag: OCC
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Bank Regulatory Arbitrage and Deregulation: the Number of Bank Regulators Matters
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One of the key points of debate over financial institution regulation reform is how many different bank regulators there should be and the extent of their respective bailiwicks. Some argue that the number of regulators is a secondary issue. It's not. It's a first tier concern. A critical flaw of our banking regulation system is the ability of financial institutions to engage in regulatory arbitrage, which has a corrosive effect on the quality of bank regulation. As long as there are multiple federal banking regulators supervising essentially equivalent financial institutions there will be regulatory arbitrage, which will inevitably undermine whatever statutory framework Congress sets forth for financial institution regulation.
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Leap Year Interest
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Call this the Pirates of Penzance card. Chase was recently sued over its calculation of finance charges in a leap year. The suit alleges that Chase computed the daily periodic rate applied to the plaintiff’s balance based on a 365 day year when it was a 366 day leap year. The difference in rates resulted in an additional finance charge of 4 cents.