By Davenport, Todd
American Banker , Vol. 168, No. 217
The latest round in the fight over federal preemption of state laws is dominating the agenda of Comptroller of the Currency John D. Hawke Jr., who said he is puzzled by the urgency and ferocity of his critics this time.
"This is a debate that has been going on for years," Mr. Hawke said in an interview last week. "I have never seen such shrill, extravagant claims being made by the states."
The argument that a state law does not apply to a national bank -- as the Office of the Comptroller of the Currency asserted in July when it preempted the Georgia Fair Lending Act -- lined up predictable opposition from the states.
But the matters at issue -- predatory lending and consumer protection -- lend themselves to emotional rhetoric. Some agency detractors are almost apocalyptic, painting Mr. Hawke as the would-be executioner of the dual-banking system that has been in existence since Civil War-era laws created federally chartered banks.
Mr. Hawke argued that the OCC is not so much acting as reacting.
"Why aren't people focusing on what the states are doing?" he asked. "Why aren't they focusing on the aggressive posture of the states in reaching out to apply laws to national banks in the face of a virtually unbroken precedent that they don't have the authority to do that?"
Mr. Hawke has acknowledged that predatory lending is a serious problem, but said neither the OCC nor the states have come up with firm proof that it is a problem at national banks.
The failure to distinguish between subprime lending and predatory lending is also troublesome, he said.
"The evidence is very compelling, and common sense would tell you the same things: that these laws put up barriers to good subprime lending, nonpredatory subprime lending," he said. "We've got a record level of homeownership in this country today, and that's due in good part to the emergence of the subprime markets."
State bank supervisors have other motives beyond defending consumers, Mr. Hawke said. They "are involved in a turf battle. They see preemption as a competitive advantage that national banks have, and they believe it hurts the competitive position of state-chartered banks."
He counters that state-chartered banks pay less for examinations because of structural imbalances in the exam process.
"What we see in the states is very aggressive proselytizing of national banks," he said. "There is a high degree of anxiety in the states about the viability of the state banking system, and it is leading them to try and level the ground on preemption and to get national banks to switch based largely on fee differentials."
Mr. Hawke further criticized the parity provision that extended the national-bank preemption of the Georgia Fair Lending Act to state-chartered banks.
If states "think stronger consumer protection laws are necessary, make them applicable to state-chartered banks, and promote them," he said. "If they really believe in competition, there are a lot of ways that they could induce people to deal with state-chartered banks, and make the state charter more attractive. But that's not really what the state bank supervisors want."
Instead, "they want national banks subject to all state laws and" they want to "eliminate the very differences that they are bragging about in maintaining a state charter. I don't see how they can reconcile those two positions. …