The Office of the Comptroller of the Currency's new preemption rule -- which leaves in place the very same controversial preemption regime that Congress sought to overturn in the Dodd-Frank Act -- has rightly been the subject of lots of criticism. Indeed, the General Counsel of the Treasury Department, of which the OCC is a part, took the unprecedented step of submitting an official comment in the rulemaking docket sharply criticizing the rule as contrary to Dodd-Frank. The leading academic expert on OCC preemption, Art Wilmarth of GW Law, has been even harsher in his criticism. The rule is a blatant power grab that barely tries to conceal the OCC's contempt for Congress. I have little doubt that when the federal courts are done with it, the rule will be Swiss cheese.
Enter former OCC deputy chief counsel and current bank lobbyist Ray Natter, who takes the position that the rule is legally defensible. I had a chance to publicly debate Ray on this issue twice over the past month as part of the Annual Consumer Financial Services Institute in New York and Chicago and, sadly, I don't think either of us succeeded in convincing each other. But Ray was kind enough to send me a link to his new article on the subject, The Dodd-Frank Act and National Bank Preemption: Much Ado About Nothing, which will be published soon in the Virginia Law & Business Review. I thought I'd share it with interested readers so they can evaluate the arguments and judge for themselves.
My view is that the OCC's sophistic attempt to preserve blanket preemption in the face of Dodd-Frank is not only doomed, but bad for the very bank masters that OCC is trying to serve. What happens to the banks when aspects of the preemption regime are toppled? Banks are compliance oriented and crave few things as much as regulatory certainty; the OCC's bad legal product guarantees that they will experience the opposite. Several in-house bank lawyers that I've talked to are less than thrilled by this state of affairs.