GUEST POST BY MARK SAVAGE, CU Senior Attorney.

Today, New York Attorney General Cuomo is due to file his opening brief in a case before the United States Supreme Court which presents a major banking and civil-rights issue, and an immediate opportunity for relief to consumers. Treasury Secretary Geithner and Attorney General Holder must decide whether they will reverse the Bush Administration’s long standing position that states cannot enforce state laws against predatory lending practices by banks—the kinds of practices that lead directly to the current economic crisis. So Consumers Union recently wrote Secretary Geithner and urged him to start standing on the side of consumers and consumer protection, not the banks and predatory lending.

New York's Attorney General tried to investigate whether the residential mortgage-lending practices of several national banks and their subsidiaries in New York were racially discriminatory because they were issuing high-interest home mortgage loans in significantly higher percentages to African-American and Latino borrowers than to White borrowers.

The Treasury Department's Office of the Comptroller of the Currency (OCC) and a consortium of national banks sued New York to prevent this investigation and any subsequent enforcement of New York's anti-predatory lending laws against national banks. Now the case is before the U. S. Supreme Court, entitled Cuomo v. The Clearing House Association, L.L.C. and Office of the Comptroller of the Currency, No. 08 453. SCOTUSblog has posted all the briefs for certiorari here.

For the past four years and more, the OCC has tried to block state efforts to protect consumers on mortgage and other banking issues, claiming that federal law preempts state anti-predatory lending laws and other state consumer protection laws. When states tried to monitor mortgage lending and to protect consumers, the OCC instructed the banks to contact the OCC first, and then wrote letters back to the banks and state banking agencies asserting that the states had no authority to investigate or enforce state laws against national banks and their subsidiaries.

The OCC’s letters on behalf of national banks covered states like Michigan, California, Ohio, and Georgia—now among the very states with the highest foreclosure rates at the center of the mortgage crisis. Wachovia, which the OCC defended before the United States Supreme Court in 2007, subsequently found itself on the brink of collapse because of risky mortgages and was forced to sell itself to Wells Fargo. Now, as borrowers preyed upon by predatory lenders face foreclosure and home prices continue to drop, the mortgage crisis has exploded into a worldwide financial and credit crisis.

The stakes and long-term consequences are enormous. The national banks that the OCC regulates comprise almost three quarters (73.76% as of September 30, 2008) of the consolidated assets of the nation's large commercial banks. The nine largest national banks and their mortgage subsidiaries—regulated by the OCC—alone comprise 40 percent of all outstanding mortgages.

Will Secretary Geithner stand on the side of consumers and consumer protection in this case, or the side of banks to prevent state enforcement of anti-predatory lending laws? The new administration has vowed to make sure the problems that created the current crisis are fixed so that we won't find ourselves here again. That will take all hands on deck. We hope that means working with the states, not against them. He must file his statement in the case on March 25, 2009.