Court asks US govt. views in state banking case

WASHINGTON - The U.S. Supreme Court on Monday asked the federal government for its views in a case on whether federal law and regulations pre-empt state regulatory authority over state-chartered subsidiaries of national banks.

At issue is a ruling by a U.S. appeals court that sided with Wachovia Corp. (WB.N: Quote, Profile, Research) and held that state banking officials cannot regulate operating units of national banks.

Connecticut, supported by 40 other states, appealed to the Supreme Court. It said the issue of regulatory authority over operating subsidiaries of national banks was of serious importance to the states in their efforts to protect consumers from abusive mortgage lending practices.

In a brief order, the high court asked Solicitor General Paul Clement to file a brief in the case expressing the views of the federal government.

The appeals court ruled in July that provisions of the National Bank Act and the regulations issued by the Office of the Comptroller of the Currency (OCC) pre-empted state regulation. It upheld a federal judge's decision that federal law takes precedence in this area.

The appeals court ruling was viewed as benefiting other national banks, such as Citigroup Inc. (C.N: Quote, Profile, Research), Bank of America Corp. (BAC.N: Quote, Profile, Research), JPMorgan Chase & Co. (JPM.N: Quote, Profile, Research) and Wells Fargo & Co. (WFC.N: Quote, Profile, Research).

Charlotte, North Carolina-based Wachovia had sued Connecticut Banking Commissioner John Burke in 2003.

It said the reclassification of Wachovia Mortgage Corp. as an operating unit of Wachovia Bank, a national bank, rather than as a unit of Wachovia Corp., meant Wachovia Mortgage need not comply with Connecticut requirements for non-bank mortgage lenders.

It relied in part on OCC rulings giving that office exclusive power over national banks and their units.

It could take several months before the federal government files its brief in the case. The Supreme Court then will decide whether to hear Connecticut's appeal.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.