High court: States can investigate banks

WASHINGTON, June 29 (UPI) -- The U.S. Supreme Court ruled 5-4 Monday states can investigate national banks, despite federal regulation of banking.

The narrow decision came outside the normal ideological lines of the court, with conservative Justice Antonin Scalia leading the court's four-member liberal bloc in ruling for states.

The New York attorney general's office began an inquiry into whether national banks violated the state's fair-lending laws, sending letters in 2005 to the U.S. comptroller of the currency and a banking trade group. The state requested, "in lieu of subpoena," that the comptroller and the group provide the attorney general's office with non-public information about their lending practices.

The federal comptroller and the banking group filed suit, and the federal courts eventually agreed that the states were pre-empted by the National Bank Act from enforcing state lending laws against national banks.

Monday, the slim Supreme Court majority disagreed.

The lower court's ruling that the banking act pre-empted state investigation was not a "reasonable interpretation" of federal law, Scalia wrote in the majority opinion.

"Evidence from the time of the (banking act's) enactment, this court's cases and application of normal construction principles make clear that the (banking act) does not prohibit ordinary enforcement of state law," he wrote. The majority opinion upheld the lower courts' rejection of state subpoena powers in such an investigation, but reversed as far as the state bringing judicial enforcement actions.

(Cuomo vs. Clearing House Assoc., No. 08-453)