Democratic State AGs Want Greater Power to Supervise Banking, Doubt Federal Efforts

In the last week of December 2017, Democratic senators introduced the “Accountability for Wall Street Executives Act of 2017,” which would amend the National Banking Act to allow state AGs to request a wide variety of information from nationally-chartered banks.  As the Supreme Court explained in Cuomo v. Clearing House Ass’n, L.L.C., 557 U.S. 519 (2009), the National Banking Act distinguishes between “visitorial powers” – such as examination of a bank’s accounts or inspection of its records – and law enforcement, reserving most of the former to the federal government, while allowing state AGs to engage in the latter.  The proposed legislation would amend the National Banking Act to allow state AGs to exercise certain “visitorial” powers: (1) to review bank records “to ensure compliance with unclaimed property or escheat laws,” (2) to “issue subpoenas or administer oversight and examination” where the state attorney general has “reasonable cause to believe” that a bank has violated a state law, and (3) to require a bank to submit “aggregate loan data” and information on the “types of products” it offers.  These provisions, in combination with state laws authorizing civil investigative demands and similar process, would hand state AGs powerful tools to exert investigative authority over an arena that is currently dominated by federal law.

While the proposed legislation’s prospects are grim so long as Republicans control both houses of Congress, it speaks to Democratic state AGs’ appetite for regulatory power in the banking sector, where they fear the federal government is pulling back.  Earlier in December, NY AG Eric Schneiderman sent a letter, co-signed by 16 additional Democratic state AGs, to President Trump in support of the continued independence of the Consumer Financial Protection Bureau from direct White House supervision, in response to the appointment of Mick Mulvaney as the CFPB’s acting director.  The letter, in addition to criticizing Mulvaney, promised that the state AGs would “continue to enforce [state] laws vigorously regardless of changes to CFPB’s leadership or agenda,” and that, should the CFPB pare back enforcement at the federal level, the state AGs would “redouble our efforts at the state level to root out […] misconduct and hold those responsible to account.”

Both developments point to continued vigilance by blue-state AGs on banking, lending, and similar issues.

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