Back before he was Client #9, Eliot Spitzer was a vicious New York Attorney General who made a name for himself prosecuting bad bankers. His successor, Andrew Cuomo has been modeling his career after Spitzer's, though I hope it will not also deviate to include late-night rendezvous at the Mayflower Hotel. Like Spitzer, Cuomo ran into a problem as attorney general: his power to prosecute banks was limited, because states did not have clear standing to challenge the practices of national banks. Today, the Supreme Court changed that.

From the Washington Post:

The decision gives state attorneys general the ability to pursue in court banks that are alleged to have violated state laws such as those protecting consumers. Banking groups and their national regulator, the Office of the Comptroller of the Currency, argued that that power is restricted to the federal regulator.



The nation's highest court agreed with the attorneys general. This seems like the right decision to me, despite banks' complaints.

On a purely theoretical level, if a national bank is breaking state law, doesn't it seem kind of obvious that the state should have something to say about that? Sure, the federal regulator might also get angry, but chances are the state will be more concerned.

I'm no legal expert, but I'm not sure why a state law, unless deemed unconstitutional, should be allowed to go unenforceable for any business, even if federally regulated. Here's the banks' sob story, from the Post's article:

National banks "will face a patchwork of duplicative and conflicting federal and state regulation and enforcement actions," said Edward L. Yingling, chief executive of the American Bankers Association. "This will make it difficult to serve consumers in today's high-tech, mobile society where people and bank services move constantly across state lines."



Their argument amounts to inconvenience. That seems pretty weak to me. How about this idea: if you hope to go national, you must have the infrastructure to ensure that you comply with the laws in all the states you enter. That seems pretty reasonable to me.

Will this increase the costs for banking? Probably. After all, banks will need more lawyers and regulatory experts. They will probably also need to send some customers new disclosures when they move from state to state. Still, I feel that's a small price to pay for forcing banks to obey state law.

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