Supreme Court Decides Wachovia v. Watters

In a 5-3 decision announced today, the U.S. Supreme Court ruled in favor of the banking industry in the important federal pre-emption case Wachovia v. Watters.

“In accord with the courts of appeals that have addressed the issue, we hold that Wachovia’s mortgage business, whether conducted by the bank itself or through the bank’s operating subsidiary, is subject to OCC’s superintendence, and not to the licensing, reporting and visitorial regimes of the several states in which the subsidiary operates,” Justice Ruth Bader Ginsburg wrote in the majority opinion.

ABA filed a joint amicus brief on behalf of the banking industry in the case. “We’re pleased that the Supreme Court has resolved this issue once and for all,” said ABA President and CEO Ed Yingling. “The court’s decision reaffirms that, for national banks, the business of banking -- whether through the bank itself or an operating subsidiary -- is regulated by the OCC.”  The decision avoids “ a patchwork of duplicative and conflicting federal and state regulation,” Yingling said.  “Instead of being distracted by who is enforcing which law, now the industry can focus on the more important issue of compliance with the law itself.”

Justice John Paul Stevens, joined by Chief Justice John Roberts and Justice Antonin Scalia, dissented in the court’s ruling. Justice Clarence Thomas did not participate in the case.