Viewpoint: No Role for N.Y. in National Bank Probes
Eager, Robert C., Tayrani, Amir C., American Banker
For the last year New York Attorney General Spitzer has been asserting his authority to investigate housing lending practices of major national banks. The case testing his authority is now on appeal to the Second Circuit. Final briefs in support of the banks' position are due to be filed today.
This article highlights three fundamental flaws in Mr. Spitzer's position.
First, the New York law he is seeking to enforce (Executive Law section 296-a) is preempted as to all federally chartered depository institutions by the federal Fair Housing Act.
The Fair Housing Act provides a broad federal prohibition against discrimination in housing lending and includes a "savings clause" that preserves certain equivalent state anti-discrimination laws. To have effect, however, "saved" state laws must be enforceable by a HUD-"certified" state agency with existing state jurisdiction and capable of imposing an effective remedy on the offending party.
There is no legal basis for any state agency to meet Fair Housing Act certification requirements for a federal depository institution, and therefore no state law purporting to reach such a federal entity is "saved" from FHA preemption. The act makes clear that only it and other federal laws apply to the lending activities of federal depository institutions. The FHA is preemptive and displaces the New York law entirely with respect to any federal depository institution.
Second, the federal anti-discrimination laws contemplate no role for investigation or enforcement by a state attorney general concerning alleged lending discrimination by a federal depository institution.
The Fair Housing Act, HUD regulations, Executive Order 12,892, and a policy statement issued jointly by HUD, the Justice Department, and the federal banking agencies provide a comprehensive approach to fair-lending compliance by federal depository institutions in which federal agencies exclusively have assigned roles.
HUD is the federal agency with principal responsibility for implementation of the Fair Housing Act and is responsible for handling all FHA complaints. It can investigate, process, and resolve the complaint itself through administrative means, or it can authorize the Justice Department to initiate a civil lawsuit.
The HUD rules expressly address the role of coordinate federal agencies, including the banking agencies. Moreover, those rules provide that a complaint will not be referred to a certified state agency when it calls for "proceedings by any governmental licensing or supervisory authorities," in which case "the assistant secretary shall transmit the information upon which such belief is based to the attorney general, federal financial regulatory agencies, other federal agencies, or other appropriate governmental licensing or supervisory authorities. …