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More Proof That Bush Administration Doesn’t Give A Damn About “The Little Guy”

Government regulations of business and industry, whether federal or state regulations, are designed to protect the consumer and the natural world from the excesses of unbridled capitalistic business desires. In many cases (but not all) state regulation goes farther than federal regulations in protecting people and places. Perhaps it is because states have a more direct responsibility to protect their particular citizens, or perhaps it is because different states have different concerns and need more regulation over certain things than federal regulation offers. And in some cases, state regulations go too far in one direction while federal regulations go too far in another.

Normally, federal regulations try to govern business practices that occur over the entire country in general while leaving room open for states to add additional regulations as they see necessary. Such has been the case with the national banking industry, and in particular the subsidiary companies banks own that handle other financial transactions, like mortgages, annuity sales, car loans, investment advice, and the like. National banking in and of itself has been historically immune to state regulation and under the aegis of federal authorities insofar as what they can and cannot do. But in 1966, the Office of the Comptroller of Currency authorized banks to undertake the aforementioned additional financial enterprises so long as the new business subsidiaries were chartered by individual states. For roughly 35 years, states held the power to regulate those subsidiary (and state chartered) businesses and pass rules that would protect their state consumers from predatory lending practices, under-disclosure, and other such matters.

Enter the Bush Administration. Like most administrations, Team Bush inserted it’s own folks throughout the executive branch, and the OCC is a branch of the Treasury Department, an executive branch of government. In 2001, the OCC changed the rules on the banking subsidiary industry, essentially stripping from states the rights to regulate these businesses. In other words, federal authority was trumping state authority, and in the process eliminating decades worth of consumer protections enacted by states and replacing them with nothing. It was now open season on consumers by banking subsidiary companies. And following the general rule of thumb of the Bush Administration, little if any oversight was undertaken by the OCC to assure that national banks and their subsidiary businesses weren’t abusing consumers and ignoring what had become standard protections over the last 35 years.

Naturally, someone (in fact several) decided to challenge the new rule and the case made it to the Supreme Court where the justices decided in favor (5-3) of the banking industry and the OCC over the states and the rest of America.

In principal, I agree with the justices decision from a point of law. The 1863 National Bank Act established the current charter system and set up the OCC and gave authority to that body to govern banking regulations. And the fact that the 1966 rule was an administrative rule and not a congressional act (or law) led the court to rule on the side of the Administration. But the fact that the ‘rule’ had survived through successive Republican and Democratic administrations shows me that it was by and large an effective way to handle the situation of subsidiary banking businesses. Alas, Team Bush thought otherwise, changed the rules, and quite possibly has led to the increasing number of predatory lending practices that have started to be exposed in the sub-prime lending industry. And these lending meltdowns are going to eventually touch us all. Aside from opening the door wide open to target those with low income, low education, and poor financial histories, the financial practices of the last six years have helped fatten the coffers of another sector of the economy- one that feeds the war chests of both political parties, but has given significantly more to the Republican party since 1996. Looks like those donations have paid off nicely for them.

It should be noted that in arguing the case at the Supreme Court, all 50 state attorneys general and all 50 state bank regulators urged the justices to find the new rules “out of bound” while arguing against the OCC. Unfortunately the justices did not find that particular argument compelling, and based on the law, they probably couldn’t have. Still, were it not for the Bush Administrations changing the rules of the game, none of this would have come into play. See? I told you the Bushies don’t give a damn about the “little guy.” They would rather pay back their political benefactors than make sure those same benefactors aren’t screwing you, the voter.

The only recourse now it seems is for Congress to take up the matter and enact legislation stripping the OCC of the power to discard state regulations on state chartered financial institutions that are connected to national banks.

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