The case arose from a 2005 inquiry by Eliot Spitzer, then New York’s attorney general, into possible racial discrimination in the real estate lending of Citigroup, HSBC, JPMorgan Chase and Wells Fargo. Mr. Spitzer said that information made public by the banks suggested that a much higher percentage of black and Hispanic borrowers were charged higher rates than white borrowers.
Mr. Spitzer wrote to the banks to seek more information, saying the disparities “are troubling on their face and, unless legally justified, may violate state and federal antidiscrimination laws.”
The Office of the Comptroller of the Currency, part of the Treasury Department, sued to stop the inquiry. The office’s regulations, promulgated under the National Bank Act, say that only it may examine banks’ records or enforce compliance with federal or state laws.
A divided three-judge panel of the United States Court of Appeals for the Second Circuit in New York agreed with the comptroller’s office.
“Congress has already expressed its intent to limit the role of the states in regulating national banks — especially when such conduct involves the exercise of powers granted to the banks by federal statute and regulation,” Judge Barrington D. Parker Jr. wrote for the majority, saying the regulation was a proper use of the comptroller’s office’s authority.
Judge Richard J. Cardamone, dissenting, said the majority had “altered the compact between the state and national government.”
In urging the Supreme Court to hear the case, the New York attorney general, Andrew M. Cuomo, echoed that theme. He said the decision of the Court of Appeals “works a major alteration of the balance of power between the federal and state governments” that “deprives states of the power to enforce against national banks antidiscrimination laws and other laws.”
The implications of the eventual decision in the case, Cuomo v. Clearing House Association, No. 08-453, may not be limited to investigations of discriminatory lending or to banking regulation generally.
The Bush administration has often said, in various settings, that federal laws, regulations and actions block, or “pre-empt,” parallel actions by state officials. A brief from the Obama administration is due at the end of March, and it will have to decide whether it wishes to take a different approach.
Mr. Cuomo’s position drew a supporting brief from the other 49 states that was harshly critical of the comptroller’s office, which the brief referred to by its initials.
“Prior to the O.C.C.’s recent assertion of exclusive enforcement authority, the O.C.C. had minimal interest in consumer protection,” the brief said. “As subprime mortgage lending abuses became epidemic, the O.C.C. and other banking regulators were criticized for their slow response.”
“By contrast,” the brief continued, “states were enacting predatory lending laws and pursuing major national lenders for predatory lending practices. Efforts by state attorneys general to persuade the O.C.C. to temper its pre-emption zeal were unavailing.”