The Treasury Department's Office of the Comptroller of the Currency, which regulates national banks, also filed suit, arguing that Spitzer was improperly encroaching on its rule under an 1864 law that it was the only entity with the "visitorial power" to examine such banks. The suits were combined and upheld by lower courts.
But Spitzer's successor, Andrew Cuomo, appealed to the Supreme Court, arguing in part that the federal agency's interpretation in effect shielded national banks from states' enforcing their own laws to protect consumers and prohibit discrimination.
In the 5-4 decision, Justice Antonin Scalia split with his conservative colleagues, joining the liberal and moderate members in ruling the Office of the Comptroller of the Currency had overstepped its bounds.
In writing the court's decision, Scalia said law enforcement investigations were different from bank examinations.
"If a state chooses to pursue enforcement of its laws in court, then it is not exercising its power of visitation and will be treated like a litigant," Scalia said.
A state would have to meet a higher standard than a regulatory examiner, he wrote, because it would have to survive motions to dismiss the case by the bank.
The state, he wrote, also would be subject to oversight by judges who "are trusted to prevent 'fishing expeditions' or an undirected rummaging through bank books and records for evidence of some unknown wrongdoing."
The attorneys general of the 49 other states and the District of Columbia supported New York. They argued in a brief that the "fallout from the subprime lending debacle demonstrates the need for more oversight and consumer protection enforcement in the area of mortgage lending."
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jim.puzzanghera@latimes.com
