State officials’ hackles are up over a new federal banking rule they say erodes consumer protections and favors the federal government in a turf war that’s been simmering for more than a century. A long list of opponents, including the National Governors Association, the National Conference of State Legislatures and the attorneys general and banking supervisors from all 50 states, is prepared to go to the mat to see the rule rescinded.
The new rule was issued in January by the Office of the Comptroller of the Currency (OCC), the federal agency that charters, regulates, and supervises national banks. The rule allows national banks to ignore protective state banking laws related to false and deceptive advertising, predatory lending, customer privacy, general consumer credit issues and no-call lists. OCC representatives say they are simply clarifying power the federal government has had for 140 years. But opponents say the OCC has overstepped its bounds; they fear the rule is a bold attempt to shrink states’ role in passing and enforcing consumer-protection laws and a move by federal regulators to usurp state powers.
State officials now are pushing Congress to step in and re-assert states’ authority over all banks within their borders. The rule change means that of the nation’s approximately 9,000 banks, 2,000 institutions such as Bank of America, Citibank and Wachovia would not be subject to state regulation because they are nationally chartered. Seven of the country’s 10 largest banks hold national charters.
If you’re looking for the bad guys, you could do a lot worse than look where the money goes. And the federal government has had this power for 140 years? Let’s see, 2004-140 = 1864. That would be right around the end of Act I of the American Experiment.* I have a feeling that we might get the chance to see the end of Act II. The interesting question is this: will there even be an Act III.
* of course, everyone knows the war was about slavery. Not expanding federal power. Nope, not at all. No, don’t look at the power players… hey, look, Dred Scott!