Planning to Circumvent the Supreme Court?

In a very interesting March 2, 2007, American Banker article, Tom Vartanian and Dominic Labitzky seem to anticipate a Supreme Court ruling in Wachovia v. Watters that will tell the OCC it has overstepped in its aggressive preemption claims.  Then what?  Well, Vartanian & Co. are well-prepared with 10 strategies national banks can adopt in response to an "adverse" opinion.  Only the first proposed response involves accepting the Supreme Court's decision and proceeding accordingly to register state-chartered mortgage lending corporations with the state regulator and to comply with state lending law and regulation.  Here are the other possible options suggested:

• Roll the mortage lending operation from a state-chartered operating subsidiary up into the national bank itself and conduct the operations as a department of the bank -- and thus exempt it from state laws (such as consumer protections from predatory lending);
• Restructure mortgage lending op subs as "Loan Production Offices" of the national bank;
• Restructure mortgage lending op subs as Branches of the national bank;
• Convert to a thrift charter and claim federal preemption for the thrift and its operating subsidiaries;
• Create a brand-new charter to be granted by the OCC -- a limited purpose, non-depository mortgage-lending charter, which, of course, would be exempt from state law;
• "Wait for friendly states to emerge" -- (can you say race-to-the-bottom?)
• "Continue to litigate" -- "identify several states where continued challenges and litigation may provide an accommodating result for op subs."
• Seek federal legislation;
• "Reconsider all of the above. There are always loopholes lying dormant among the complex catalog of federal and state statutes, regulations, and interpretations under which financial institutions operate. Experienced bankers and practitioners steeped in the history of financial institutions have found them and will always continue to find them. Let the search for the op-sub Holy Grail begin!"

Check out the article itself.

(ag) Mar. 13, 2007, in Federal Preemption