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Jaworski on the Clearing House Decision: A Supreme Defeat for the OCC

In June 2009, the Supreme Court in Cuomo v. Clearing House Ass'n, L.L.C., 129 S. Ct. 2710 (U.S. 2009) invalidated a regulation adopted by the Office of the Comptroller of the Currency (OCC) which purported to preempt efforts by state officials to enforce non-preempted state laws against national banks. After a string of decisions upholding federal preemption of various state laws as to national banks, the decision was surprising and could have significant ramifications for national banks and the dual banking system. In this Commentary, Robert Jaworski discusses Cuomo and examines its possible effects upon national banks. He writes:
     The most obvious result of the Supreme Court's decision is to permit appropriate state officials to sue national banks suspected of violating non-preempted state laws. Once such a suit is instituted, state officials would also be allowed to pursue discovery of records in the possession of the national bank. In addition, state officials would be able to use the threat of a lawsuit to "request" a national bank to voluntarily produce records. Banks receiving such a "request" would be put in a quandary -- whether to accede to such request and hopefully convince the state official that no violation occurred or reject the request and thereby invite a lawsuit.
     The impact of this decision, moreover, could become magnified should Congress decide to narrow the ability of national banks to preempt state consumer protection laws, as is proposed by the Obama administration in its plan to create a Consumer Financial Protection Agency having jurisdiction over all financial institutions. The result would be to lessen the attractiveness of the national bank charter to banks with interstate operations, perhaps to the point of reversing the recent trend -- recent in terms of the history of the dual banking system -- favoring the national charter.

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