Though reading tea leaves at the Supreme Court is notoriously tricky, several justices during oral arguments on a key preemption case appeared to support the Office of Comptroller of the Currency's ability to enforce laws exclusively at national banks.
Two years after ruling 5 to 3 in the agency's favor in another preemption case, the court is trying to determine whether state officials have the power to enforce their own laws against national banks if those laws have not been preempted.
The case stems from a 2005 investigation by then-New York Attorney General Eliot Spitzer, who requested information from several national banks - including Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. - to determine if they engaged in discriminatory practices. The OCC objected to the information request, arguing that it had sole visitorial powers, and it supported a lawsuit by The Clearing House Payments Co. LLC, representing the banks, that disputed Spitzer's request.
The fact that the Supreme Court even took the case so soon after resolving another preemption matter is unsettling to some in the banking industry, who fear that, given how negative the current political climate is for financial companies, the result could go against the OCC and national banks. But during oral arguments in late April, several justices appeared to have made up their minds, arguing that giving state officials enforcement powers over national banks did not make sense.
"How is a bank to function if 50 different attorneys general plus the federal agencies all look at the books of the bank to look at the individual loan and to make that kind of determination about which, quite honestly, reasonable people will often differ?" Justice Stephen Breyer asked.
Skepticism on the states' position extended even to justices who voted against the OCC in the 2007 case, Watters v. Wachovia. Chief Justice John Roberts, who voted in that case with two others to support Michigan's power over the operating subsidiaries of national banks, appeared to side with the OCC this time.
"When you get attorneys general officials enforcing it in a particular way, that's what causes the problem," Roberts said. "And I mean, the problem arises in a lot of areas. Even within the federal government, the FBI and DEA have different ways of enforcing that might conflict with each other."
Justice Anthony M. Kennedy saw that as a chance to voice support for the preemption rule the OCC adopted in 2004, which attempted to officially lay out the powers the agency has over national banks, including all visitorial and enforcement abilities.
"But if OCC thought there might be such a problem, couldn't it act in advance to avoid the risk?" Kennedy asked.
New York Attorney General Andrew Cuomo, who inherited the case, has argued visitorial authority does not exclude a state from enforcing its own laws.
Justice Antonin Scalia agreed with that view. "You shouldn't have a separate state law that provides a separate standard that conflicts with the federal standard," he said. "So you preempt the law. You don't say the law is in effect, but the state can't enforce it. That's a weird way to solve that problem."
Scalia dismissed arguments that the federal government should enforce state law. "It has so much spare time after enforcing federal law that it's going to be worrying about state law?" he asked.
Justice Ruth Bader Ginsburg, who voted in support of the OCC in 2007, seemed more skeptical this time, asking repeatedly if claiming visitorial powers also meant claiming sole enforcement authority. She rejected arguments that the Watters case had already settled the issue in the OCC's favor, saying such conclusions were "inaccurate."
Observers cautioned against reading justices' questions too literally. Justices sometimes play devil's advocate, and it is often unclear which way the votes will play out. For example, industry has been concerned that Justice Clarence Thomas, who recused himself from the 2007 case, would side with other conservatives to reject the preemption defense. But Thomas did not ask any questions during the argument, leaving his views unknown.
The court is expected to decide the case by the end of June.
