NAIC Joins Suit Against OCC

The OCC opinion of federal preemption standards quotes extensively from a U.S. Senate report that misconstrues the Supreme Court Barnett Bank decision, Shapo added.

One of the issues, according to Shapo, is that the Senate report minimizes the significance of Barnett by implying that it is just another legal case that addresses the issue of preempting state laws that interfere with a national bank's privileges. Barnett is a "seminal case," Shapo said.

The courts have used Barnett as a standard, and Congress has used the phrase in the Barnett decision, "prevent or significantly interfere" with a bank's ability to sell insurance, when it crafted the Gramm-Leach-Bliley Act Financial Services Modernization Act of 1999, Shapo said.

The report "twists the common understanding of the codification and legal understanding of the issue," Shapo said.

In a review of the OCC opinion, Shapo said he believes the OCC's preemption standard is "too low and does not conform with the controlling law."

The letter, he said, narrowly preserves state laws that have "only a small effect on national banks' exercise of power," and that "broadly preempts state laws that condition or confine the exercise by a national bank of its express or incidental powers."

The "broadly preemptive" language is inconsistent with the language "significantly interfere" in the Barnett case, Shapo said.

In the analysis, he added that the opinion letter's conclusion that GLB brings in any language in Barnett related to preemption is subject to another interpretation: that Congress meant only to address the standard of "prevent or significantly interfere."