by Judith E. Schaeffer, Vice President, Constitutional Accountability Center

Although the Supreme Court’s 5-4 ruling today in Cuomo v. Clearing House Association won’t garner anywhere near the attention being given to the Court’s other 5-4 decision today, Ricci v. DeStefano, the ruling in Clearing House is an important one that will help states protect their citizens through enforcement of fair lending laws. The ruling is also the death knell for one of the remaining vestiges of the Bush Administration’s aggressive pro-preemption campaign that protected corporate interests at the expense of both our federalist system and everyday Americans.

As we’ve previously discussed here, at issue in Clearing House was the validity of a regulation adopted by the Office of the Comptroller of the Currency (OCC) under President George W. Bush that preempted state efforts to enforce fair lending laws against branches of national banks. The regulation prevented states from enforcing their own laws against predatory lending and discriminatory credit practices – including the types of practices that directly resulted in last year’s subprime mortgage crisis — and was part of an aggressive effort by the Bush Administration to use federal preemption to trump important state laws that protect consumers, the environment, and public health and safety. Although President Obama recently ordered executive branch agencies to review “preemption preambles” and codified preemption rules to ensure that they do not seek to unjustifiably preempt state authority, this action came too late for the regulation at issue in the Clearing House case and, in fact, the Obama Administration chose to defend this regulation before the Supreme Court.

The Supreme Court, however, today sent the OCC’s preemption regulation to its grave. In a divided ruling in which Justice Scalia wrote the Court’s opinion and was joined by his four most liberal colleagues — Justices Stevens, Souter, Ginsburg, and Breyer — the Court held that the regulation did not comport with the National Bank Act and was therefore invalid. In his opinion, Justice Scalia noted that it was undisputed that Congress had not preempted pertinent state substantive laws applicable to national banks, and that it would therefore be “bizarre” to conclude that state enforcement of those laws had been preempted, as the OCC contended.

Citing Wyeth v. Levine, the Court’s important ruling earlier this Term rejecting the argument that federal drug labeling laws preempt claims made under state personal injury laws, Justice Scalia noted that the banking system “echoes many other mixed state/federal regimes in which the Federal Government exercises general oversight while leaving state substantive law in place.”

Justice Scalia also noted that while it was not necessary here to invoke the “presumption against preemption. . . in giving force to the plain terms of the National Bank Act . . . [n]either, however, should the incursion that the [OCC regulation] makes upon traditional state powers be minimized.”

Justice Thomas wrote a dissenting opinion joined by Chief Justice Roberts and Justices Alito and Kennedy that would have upheld the OCC’s preemption of state enforcement of fair lending laws against national banks.

Thus, by the narrowest of margins, another remnant of the Bush Administration’s harmful prioritization of corporations over state and local governments, and the citizens they represent, is consigned to the dustbin.