A decision by the Supreme Court last week upholding an Arizona law imposing harsh penalties on businesses that hire illegal immigrants could foreshadow a serious regulatory headache for national banks that have local mortgage lending subsidiaries.
The majority opinion, written by Chief Justice John G. Roberts on behalf of the court’s five more conservative members, said that Arizona was allowed to add much tougher state penalties to those contained in a 1986 federal immigration law. In legal terms, the court held that federal law did not “pre-empt” the states from enacting and enforcing local licensing laws when it comes to employing illegal immigrants.
In reaching this conclusion, the majority opinion rejected the argument that Congress intended the federal system to be exclusive.
“Implied preemption analysis does not justify a ‘freewheeling judicial inquiry into whether a state statute is in tension with federal objectives;’ such an endeavor ‘would undercut the principle that it is Congress rather than the courts that preempts state law,’” the opinion declared, quoting past cases.
So what does this have to do with banking regulation?
The narrow reading of preemption in this case may undercut a broader reading the Supreme Court gave in 2006 to pre-empt a broad reading under the National Banking Act. That case was decided by a vote of 5-3, with Justice Clarence Thomas sitting out because his son and daughter-in-law worked for the bank in question.
The contest in the banking case was whether states could regulate the state chartered subsidiaries of nationally chartered banks. The state subsidiaries are used by national banks to make mortgage loans, auto loans, small business loans and provide investment advice.
Any opinions? And is it normal for them to undercut rulings made that recently? Is this sloppy, just make shit up to fit the ideology/right wing need du jour, or can these rulings both be correct?