WASHINGTON -- The U.S. Supreme Court agreed yesterday to consider a bid by Michigan to regulate Wachovia Corp.'s mortgage-lending business in a case that may open banks to new oversight across the country.
The court said it will hear Michigan's appeal to decide whether states can apply their lending rules to subsidiaries of Wachovia and other so-called national banks regulated by the U.S. Office of the Comptroller of the Currency.
"National banks would have to choose between the benefits of maintaining an operating subsidiary and the benefits of avoiding burdensome state regulations," the Bush administration argued in papers urging the court not to consider the issue.
Forty-two states and the District of Columbia joined briefs that urged Supreme Court involvement, saying state regulations are needed to protect consumers from deceptive lending practices. "The states' ability to regulate mortgage lending and, in particular, to protect the public from predatory and abusive lending practices, is at stake," Connecticut Attorney General Richard Blumenthal argued in a court filing.
Michigan's rules require lenders to register, pay a fee, submit an annual financial statement and make documents available for inspection. The Cincinnati-based 6th U.S. Circuit Court of Appeals sided with Wachovia.
Also yesterday, the high court asked the Bush administration for advice on antitrust lawsuits that accuse investment banks of rigging initial public offerings, as the justices signaled interest in an industry bid to block the cases.
Credit Suisse First Boston Inc., Goldman Sachs Group Inc. and Merrill Lynch & Co. are among 16 investment banks and institutional investors asking the high court to throw out the lawsuits. The New York-based 2nd U.S. Circuit Court of Appeals let the cases go forward, saying they make allegations of "an epic Wall Street conspiracy."
The appeal seeks antitrust immunity for activities heavily regulated by the Securities and Exchange Commission. The firms said antitrust suits "would profoundly disrupt capital formation in the United States" by limiting the ability of underwriters to work together on initial public offerings.
The request, directed to Solicitor General Paul Clement, ratchets up the stakes in an internal Bush administration fight. At the lower court level, the SEC backed the industry, while the Justice Department's antitrust division, with the approval of Clement's office, argued the cases should be allowed to go forward.
The antitrust suits seek damages on behalf of investors who traded shares in as many as 800 Internet companies after they went public. The investors say the financial firms acted in concert to inflate the price of the shares. The companies allegedly required clients to pay kickbacks and buy more stock, at higher prices, after the securities were sold to the public.