Supreme Court LIBERALS Blocked States From Regulating Financial System

We have literally been deluged with claims that it was the Republicans who prevented effective regulations that would have prevented the Housing Finance tsunami.  It is a bald-faced lie: it was Democrats who refused to regulate Fannie Mae and Freddie Mac in order to continue to mandate foolish loans to low income and minority families who didn’t have sufficient collateral to pay their debts under the mantra of “affordable housing” (that dates back to a 1992 Clinton-era act).  I hope you read my article, “Democrats Refused To Regulate GSEs, Created Financial Tsunami,” which documents the Democrats’ astonishing lies.

But the Democrats’ abject refusal to regulate the housing finance industry extends all the way to the highest reaches of the temple of liberalism: the United States Supreme Court.  Liberal justices banned the states from having any voice in the regulatory process.  And they are directly responsible for the crisis that ensued:

Supreme Court Says Federal Government Is Sole Regulator of Bank Subsidiaries

Tony Mauro
Legal Times
April 18, 2007

National banks won a major victory Tuesday when the Supreme Court ruled that the federal government, not states, has the pre-eminent role in regulating banks’ mortgage business, even if conducted by subsidiaries.

By a 5-3 vote in Watters v. Wachovia Bank, the Court found that the National Banking Act pre-empts state regulation of banks — and that the pre-emption extends to their subsidiaries, which the Court said are “equivalent” to the national banks themselves.

Banks fought hard for federal regulation under the Office of the Comptroller of the Currency, rather than subjecting themselves to differing — and more aggressive — rules and enforcement at the state level.

In the case before the Court, Wachovia Mortgage had been licensed in Michigan, but in January 2003 it notified the state that it had become a wholly owned operating subsidiary of Wachovia Bank, and as such no longer was subject to Michigan’s registration requirements. State banking regulator Linda Watters responded by barring the company from doing business in Michigan. Wachovia went to court to challenge her decision, and the bank won in the lower courts.

Justice Ruth Bader Ginsburg, writing for the majority, ruled for Wachovia, stating that “State regulators cannot interfere with the ‘business of banking’ by subjecting OCC-licensed operating subsidiaries to multiple audits and surveillance under rival oversight regimes.”

Ginsburg also rejected states’ argument that the Bill of Right’ 10th Amendment justified a state role. The amendment, which reserves some powers to the states, does not apply in Ginsburg’s view, because the Constitution assigns banking regulation to the federal government as part of its power over interstate commerce.

Ruth Bader Ginsburg – archliberal priestess of the Supreme Court intelligentsia – wrote the majority opinion for the 5-3 decision.

And who was in the majority, and who was in the minority?

In an unusual lineup, joining Ginsburg in the majority were Justices Anthony Kennedy, David Souter, Stephen Breyer, and Samuel Alito Jr. Justice John Paul Stevens wrote a stinging dissent, accusing the majority of upsetting the federal-state balance and improperly expanding federal pre-emption doctrine. Chief Justice John Roberts Jr. and Justice Antonin Scalia joined Stevens’ dissent.

Without explanation, Justice Clarence Thomas recused in the case, though his financial disclosure forms do not reflect a connection to Wachovia.

John Roberts, Antonin Scalia were in the minority, with Clarence Thomas recusing himself, voted against this move to kill the states’ right to have any power to regulate the financial industry.  And a gang of liberals (with the exception of Alito and Stevens – a Republican Nixon appointee who has too often sided with liberals – switching roles and cancelling one another out) imposed their will in yet another example of liberal stupidity and their unconstitutional lust for power.

Blame Democrats.  Blame liberals.  They are all over this mess.  While Democrats in Congress prevented any Republican-led efforts to federally regulate out-of-control Democrat-run GSEs, Supreme Court liberals were killing any chance the states had to have any regulatory oversight of their own.

When Republicans were spearheading efforts to launch regulatory reform, Barney Frank was testifying against the regulators and against regulation:

You seem to be saying, well, these are in areas which could raise safety and soundness problems. I don’t see anything in your report that raises safety and soundness problems.

But I have seen nothing in here that suggests that the safety and soundness are at issue. I think it serves us badly to raise safety and soundness as a kind of a general shibboleth, when it does not seem to me to be an issue.

Even President Bill Clinton attributes the lack of regulation to Democrats:

Bill Clinton on Thursday told ABC’s Chris Cuomo that Democrats for years have been “resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac.”

If you elect Democrats, you will be putting the very people who created this economic tsunami in power.  And mark my words: with our markets already in crisis, you will come to rue the day you put these foxes in charge of the federal hen house.

Tags: Antonin Scalia, Bill Clinton, Clarence Thomas, Democrats, Fannie Mae, Freddie Mac, John Roberts, National Banking Act, Republicans, Ruth Bader Ginsburg, Suprme Court, Wachovia, Watters v. Wachovia Bank