Split on pre-emption
October 21, 2009 | federal legislation, industry | Comments (0)From today’s Wall Street Journal:
U.S. House Democrats inched closer to scaling back language that would allow states to issue tougher rules than a new agency to protect consumers of financial products.
Watering down the states rights’ language would appease the banking industry, which claims the original proposal would subject national banks and savings associations to a patchwork of 50 state laws.
It would also put Democrats at odds with the Obama administration, which has insisted that states ought to have the right to go beyond the new agency’s rules.
Federal preemption, or the supremacy of certain federal laws over state laws, has proved perhaps the most contentious issue of the multiday debate in the House Financial Services Committee on the controversial new agency.
Under an amendment offered by two Democrats, state consumer protection laws could only be pre-empted by federal rules if they prevent or “significantly interfere” with the ability of national banks to engage in their business.
That would give states considerably more power to push their own consumer protections than they’ve had in recent years, but not nearly the sweeping power they would have in the original proposal.
This gets back to the “ceiling versus floor” issue.
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