Key Justices Dubious About OCC Pre-emption

An attorney for Wachovia Mortgage Corp. tried to persuade the U.S. Supreme Court on Wednesday that the Office of the Comptroller of the Currency has not exceeded its powers in shielding the operating subsidiaries of national banks from state regulation, but his arguments did not seem to win over key justices.Chief Justice John Roberts and Justice Antonin Scalia were particularly hostile toward the OCC's pre-emptive powers regarding an operating subsidiary that is incorporated under state law. Wachovia's attorney, Robert Long, argued that the states cannot interfere with the lending activities of an operating subsidiary like Wachovia Mortgage. He cited numerous cases where the federal courts, including the Supreme Court, held that the states cannot interfere with the lending activities of national banks or their operating subsidiaries. However, Justice Scalia contended that the OCC is completely eliminating any distinction between a national bank and an operating subsidiary. The attorney for the state of Michigan argued that Wachovia Mortgage is incorporated under state law and is not exempt from Michigan's mortgage lending law. The justices are expected to hand down their decision in Watters v. Wachovia Bank in the spring.