Scalia! How Dare You Be Unpredictable!

In a surprising rebuke to the Conservative values that brought many of the current justices to bench, the Supreme Court of the United States ("SCOTUS") ruled today that federal bank regulators erred in blocking efforts by the state of New York to combat predatory mortgage lending (the exact same lending practices that triggered the nation's financial crisis.)

In a 5-4 ruling by SCOTUS, Justice Antonin Scalia, arguably the most conservative (and proudly asshole-y, if thats a word) jurist, surprised me by writing the majority's opinion. He was joined by the court's four liberal judges. The Scalia majority held that, contrary to what the Bush administration had argued, states can enforce their own laws on matters such as discrimination and predatory lending, even if that crosses into areas under federal regulation.

Justice Clarence Thomas (my second least favorite justice), writing for the four dissenters, argued that laws dating back to the nation's founding prevent the states from meddling in federal bank regulation. He was joined by the new guys appointed by Bush II, Chief Justice John G. Roberts and Samuel Alito, as well as the wild card, Mr-Girls-Should-Be-Protected-From-Ickiness Anthony Kennedy.

Some in the financial sector are angered by this ruling. They fear it'll lead to a variety of state laws that'll make it harder for banks and other financial firms to take a national approach to the marketplace. But consumer advocates were elated! A consumer advocacy organization rep from the Center for Responsible Lending remarked, "This Supreme Court decision is a victory for taxpayers, who have suffered enormously as a result of abusive business practices in all types of lending. This decision will help to restore confidence in the financial services industry and the national economy."

Interestingly, Congress has already been studying changes to pre-emption rules as part of President Barack Obama's proposed revamp of financial regulation. President Obama proposes the creation of a Consumer Financial Protection Agency. This new agency would have the power to write and enforce rules on mortgage lending practices and monitor the process nationwide. The proposal expressly states that these rules would be a floor nationwide. Thus, states could write their own tougher rules should they so desire.

The Bush administration argued that it had to the right to pre-empt any state effort to regulate because they were all above the law and s**t. But even after winning that argument (!!!), the OCC failed to address the issues of predatory lending that Elliot Spitzer, and later his successor Andrew Cuomo (son of Mario), sought to address.

Spitzer and Cuomo were concerned that white borrowers routinely were given lower interest rates than blacks and Hispanics. Losses in mortgage finance morphed into a global credit crisis, bringing down venerable investment banks including Bear Stearns and Lehman Brothers and insurer American International Group. And the rest, as they say, is history.

Read more here.