Supreme Court Ruling Lifts Onerous Bank Regulations

Contact: Christine Hall, 202-331-2258

Washington, D.C., April 17, 2007—Today the U.S. Supreme Court ruled that federal law, not state law, controls regulation of mortgage lending by national banks and their subsidiaries.  The vote in the case, Watters v. Wachovia Bank, was 5-3.

Hans Bader, legal counsel for the Competitive Enterprise Institute, praised the decision:

“National bank subsidiaries will be less likely to face conflicting regulations of different states or be snarled in both federal and state regulation,” said Bader.

“The result is that subsidiaries of national banks will be subject to federal regulation and to many home state regulations,” Bader explained, “but not most of the regulations of other states in which they do business.  That means consumers will save money as a result of reduced red-tape and regulatory compliance costs.”

CEI filed an amicus brief supporting Wachovia—arguing for less state regulation—on behalf of a group of economists and legal scholars. The brief argued that state banking regulations often harm consumers by increasing the cost of credit and reducing its availability.

Read the amici curiae brief of economists and scholars Marcus Cole, Christopher DeMuth, Richard Epstein, Robert Litan, Michael Staten, Peter Wallison, and Todd Zywicki in support of respondents.