Who Should Regulate Our Banks?

Today the Attorney General of New York told the Supreme Court it should be allowed to make banks in his state follow its consumer protection laws. Federal bank regulators will tell the Supreme Court that's not their place. Here's the back story:

In 2005, then NY Attorney General Eliot Spitzer wanted banks in his state to follow his anti-discrimination laws. The banks did not want to. So they sued. Their regulator, the Office of Comptroller of the Currency, sued, too.

This isn't the first time states and federal authorities have faced off on who gets to regulate our banks. But it is a battle that states generally lose. Two years ago the Supreme Court blocked states from supervising mortgage subsidiaries owned by national banks.

These days, people aren't feeling great about our regulatory structure. The state attorneys general make that case in their brief, writing, "The recent (and continuing) fallout from the subprime lending debacle demonstrates the need for more oversight and consumer protection enforcement in the area of mortgage lending."