Supreme Court gives states a victory in dispute with big banks and their captured federal regulator

Reported today at MarketWatch: Banks face state fair-lending laws: Supreme Court

AS A POLITICAL MATTER. it is certainly true that the Office of the Comptroller of the Currency, (OCC), has been a toothless tiger in exercising its regulation of nationally chartered banks. This contributed to extensive granting of high cost mortgages to weak borrowers and, perhaps critically, to the housing bubble, (although I continue to believe that if the bubble had been prevented in housing excessive credit and deficient saving would have produced a bubble and catastrophic collapse anyhow elsewhere in the economy).

AS A MATTER OF LAW, say critics of the decision, the Court is reversing a settled grant of federal authority over nationally chartered banks dating from the 1864 National Bank Act but, in fact, the dispute was over a 2004 OCC policy change designed to hamstring the State's recognized authority to enforce their consumer protection laws as they apply to consumer and mortgage lending. The states saw it coming as shown by this 2003 letter to the OCC from the National Governors Association Economic Development and Commerce Committee.

That the swing vote in the 5-4 decision came from Justice Scalia who defected from his conservative faction is being much commented upon. This would not really be remarkable from a state's rights, anti-big federal government, traditional conservative but is surprising in an era of neocon ascendancy over the paleocons. While not as central to neoconservatism as their militaristic foreign policy, general aggrandizement of federal authority in the executive branch has been a useful component of neocon political strategy. It was helpful to large corporate allies, including big banks, that could benefit from American international hegemony exercised in their favor. Perhaps Justice Scalia is more traditional than has been thus far perceived.

Whither the Republican Party

Since every blogger interested in doing so has by now posted their opinions about the future of the Republicans I might as well add my own view.

Right now the Republican party is a motley alliance of "conservative" factions: social conservatives, neo-conservatives, fiscal conservatives and minor scatterings of libertarians, isolationists, goo-goos, supply-siders, etc. If the party reforms by one faction rising to dominant ascendancy it will be too small to be competitive as a major party. The task, as I see it, is to find unifying principles acceptable to most of the factions.

One bit of good news is that the neocon faction will probably remove itself in order to infiltrate the new dominant party. They always were first and last power-seekers loyal only to their foreign policy agenda.

Perhaps the remaining factions can agree to a revived emphasis on law and order. This could include the belated recognition that terrorists are best understood as criminal, not military, enemies. There should also be renewed respect for Constitutional provisions such as habeus corpus, prohibition on warrantless searches and the duty of Congress to exercise oversight of the executive and to bear the responsibility of declared warfare. The Department of Justice must be shielded from attempts to use it for partisan purposes. Much of this is easier to advocate for the party not in power and all of it should be worthy of support by anyone claiming to be a conservative.

I believe a focus on such issues would be beneficial to the Republican party and, more importantly, for the country. We need an effective loyal opposition.