Banking Law

Beneath The Bloviation

While the blogosphere bloviates breathlessly about the U.S. Treasury Department's blatant grab for unbridled power, the likes of which has not seen since Julius Caesar crossed the Rubicon, some bank law nerds have been diverted by more mundane aspects of the ever-expanding reach of federal preemption of state banking laws as they apply to the operations of national banks and federally-chartered thrifts. Hard on the heels of the US Sixth Circuit Court of Appeals decision that supported the OTS extending federal preemption of state licensing laws to a federal thrift's "exclusive agents," the US Second Circuit Court of Appeals has ruled that a Connecticut law that attempts to restrict the operations of "facilitators" who "facilitate" (e.g., take and forward to a lender loan applications for) "tax refund anticipation loans" made by third party lenders, does not apply to such "facilitators" when their "facilitation" is undertaken on behalf of loans made by national banks. Specifically, provisions of the Connecticut law that would limit locations where such loans could be made, or would restrict the annual percentage rate of such loans, do not apply when the facilitators are facilitating loans made by national banks. According to the trial court and the Sixth Circuit Court of Appeals, such state law provisions are preempted by the National Bank Act. With respect to annual percentage rates, the National Bank Act allows national banks to "export" the rate allowed by the state where they are "located" (i.e., where their main office or a branch office is located, or the state named in their certificate of organization). The Connecticut law attempted to restrict the annual percentage rate to a rate (or rates) lower than that that would be allowed by the state where the national bank in question was located.

We'll see how much power Congress eventually gives the Treasury Department, although if appearances on the Sunday morning talking-head shows are any indication, Democrats and Republicans in Congress actually appear to be cooperating with one another to give the new "Garbage Debt Czar" the power he needs to collect the waste generated by "just a few bad loans too many" and dispose of them to God-knows-who for God-knows-what-price at a time some time in the future (as long as the Czar hustles up and buys or commits to buy the garbage within the next two years). The details are still being worked out (not that has lessened the blather from all sides as to how this is the beginning of the end of life on this planet and, perhaps, the universe). We'll also be interested to see how and when the Democrats will exact their ton of flesh from the hides of the "fat cats" they claim are completely responsible for this present pickle, and how much largess for their core constituencies (non-profit consumer groups, trial lawyers, and those "common men and women" who had "a lot of junk done to them" by the fat cats). With the blogs in full bloom, rest assured that no thought about the matter, no matter how trivial or inane, will be left unuttered.

In the meantime, under the radar scope, the federal court system will continue its slow but inexorable work of consigning the Tenth Amendment to the dustbin of history.

H/t CSBS

Full post as published by Bank Lawyers Blog on September 21, 2008 (boomark / email).