The Governator and the Governor of Jersey teaming up might sound like a decent premise for a Saturday Night Live skit or the worst buddy movie ever made but they are actually doing something really useful for consumers in their states. They sent a letter to Barney Frank, Chairman of the House Financial Committee urging Congress to limit Federal regulators ability to preempt state laws or in their words “preserving state authority to enforce laws and regulations covering financial services”

The National Governors Association laid out their reasons:

States are often the first responders to emerging financial service threats
That mortgage crisis that killed our economy. Yeah, that started in California and could have been prevented if California had not been preempted by Federal regulators (the OCC)

There is no compelling evidence that federal preemption of state regulation of financial institutions protected consumers or investors more during the economic crisis

The argument that state regulation of financial services chills competition and creates a drag on this sector and the overall economy rings hollow
-Under federal preemption we have had one of the worst recessions in history

Preemption discourages federal-state collaborations to protect consumers and investors
Where the federal government fails or is too slow to protect states can be more reactive and nimbler in meeting local needs of consumers

Click here for entire letter

I can’t believe it either but Jersey, California and the rest of the bipartisan National Governors Association have the right idea here. States should be allowed to protect consumers from bad financial products when the Federal government fails to act. Not only to provide better protections for consumers but also to help put out small fires before they become huge roaring global economy size forest fires.