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Federal Banking Regulator Sues NY's Spitzer

June 17, 2005
The Office of the Comptroller of the Currency (OCC), the federal agency that regulates national banks, has filed suit against New York Attorney General Eliot Spitzer, alleging he is interfering in the OCC's fair lending examination and supervision processes.

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The OCC's action follows the filing of a similar suit yesterday by The Clearing House Association.

"This action is consistent with numerous other actions taken by The Clearing House over many years to help ensure uniform regulation of banks that operate in multiple states," the association said in a statement on its Web site.

It's the latest in a series of setbacks for the crusading attorney general. Last week, former Bank of America Corp. broker Theodore Sihpol was found not guilty of improperly trading mutual funds, the first real courtroom test of Spitzer's campaign against financial fraud.

"The OCC is absolutely committed to assuring that the national banking system is free of lending discrimination of any sort," said acting Comptroller of the Currency Julie L. Williams. "This issue is vital and it is complex and it must not be politicized."

"Last month, I reached out to the Attorney General's office to discuss how we each might work in a complementary way, in the areas of our respective jurisdiction, to ensure that laws against lending discrimination are upheld," she said.

"The Attorney General's office has indicated that it is not interested in pursuing such a collaborative approach. Unfortunately, the Attorney General's actions undermine the OCC's ability to effectively implement our supervisory responsibilities."

"While the New York Attorney General's office has legitimate authority for a great number of lending institutions operating in the state, federal law provides that lending activities of national banks and their subsidiaries are under the jurisdiction of the OCC," said Williams.

"These are not new legal standards," she added. "The laws here were enacted in 1864."

The Clearing House Association said the issue is "whether there should be uniform oversight of national banks that do business in many states."

"Regulation by potentially thousands of state and local governmental entities would exponentially increase the complexity of providing credit to consumers and significantly increase lending costs for financial institutions. The direct consumer impact would be higher borrowing costs and reduced access to mortgage financing," the association said.

The OCC is in the process of assessing new data collected under the Home Mortgage Disclosure Act as part of its fair lending evaluations.

"The efforts of the New York Attorney General to examine and direct the actions of national banks and their operating subsidiaries creates confusion and uncertainty concerning the OCC's authority and its supervisory expectations for national banks that undermines our ability to carry out our supervisory responsibilities," said Williams.

In its suit, the OCC noted that the New York Attorney General's office has sought both public and non-public information about the mortgage lending business of four national banks that do business in New York.

However, Section 484 of the National Bank Act, enacted in 1864, generally forbids any assertion of visitorial authority by state officers to supervise or examine national banks and prohibits state authorities from inspecting the records of national banks or bringing enforcement actions against national banks, except as specifically authorized by federal law.

Under federal law and OCC regulation, the operating subsidiaries of national banks are treated the same as the bank itself.

In seeking relief, the OCC's complaint states that the New York Attorney General's "violation of the federal law interferes with the OCC's ability to carry out its responsibilities under federal law, causing irreparable harm to the OCC's administration of the national banking system."

In addition to seeking a preliminary injunction, the OCC is asking the federal court to:

• Declare that the state Attorney General may not demand, examine, or inspect the books and records of national banks or their operating subsidiaries, except as specifically authorized under federal law.

• Declare that the New York agency has no authority to enforce the Equal Credit Opportunity Act, New York Executive Law section 296-a or other laws, rules or regulations concerning the banking activities of national banks or their operating subsidiaries except as specifically authorized under federal law.

• Permanently enjoin the New York Attorney General from demanding, examining or inspecting the books and records of any national banks or their operating subsidiaries, except as specifically authorized by federal law.

• Permanently enjoin the New York Attorney General from instituting any enforcement activities against national banks or their operating subsidiaries, except as specifically authorized by federal law and from any further usurpation of the OCC's exclusive authority to supervise and examine national banks or their operating subsidiaries, except as specifically authorized by federal law.

The Office of the Comptroller of the Currency was created by Congress to charter national banks, to oversee a nationwide system of banking institutions, and to assure that national banks are safe and sound, competitive and profitable, and capable of serving in the best possible manner the banking needs of their customers.

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