Wall Street's hope of curtailing the investor protections in Dodd-Frank through the courts is predicated on a shift in the Supreme Court toward favoring corporations that dates back decades, to the 1972 appointments of Lewis Powell and William Rehnquist. As a private lawyer, Justice Powell famously prepared an oft-cited memo calling on the U.S. Chamber of Commerce to launch a litigation campaign responding to "the assault on the [free] enterprise system," an invitation the Chamber has since taken up with a vengeance. This pro-corporate stance by the Court — which, it's important to mention, is often not limited to its "conservative" members — can be seen as early as a 1978 decision, Marquette National Bank of Minneapolis v. First of Omaha Service Corp., in which Justice William Brennan interpreted the National Banking Act as allowing a Nebraska bank to charge Minnesota consumers higher interest rates than were permitted under Minnesota law. Two decades later, in Smiley v. Citibank (1996), Justice Scalia led a unanimous Court in extending Marquette, barring California from using consumer protection laws to protect its residents by limiting the credit card late fees imposed by a South Dakota bank. Recently the Court has split on whether national banks are exempt from all state power, with a five-member majority rejecting Michigan's ability to subject mortgage lenders to registration and inspection in Watters v. Wachovia Bank (2007), while a different five-member majority in Cuomo v. Clearing House (2009) carved out a narrow exception allowing New York to investigate — but not prosecute — the lending practices of national banks in the state.
Will Wall Street prevail?
Dodd-Frank financial regulation bill could face a Supreme Court test similar to the Affordable Care Act
In the context of Dodd-Frank, the stakes before the federal courts are much higher than ever before. Most of the aforementioned Supreme Court cases were decided without the backdrop of a potential worldwide financial Armageddon. If the U.S. economy is not protected from another crisis like that of 2008, the results will hurt every American household through more lost jobs, lost pensions and lost wealth. Moreover, the American public will probably never again stand for another trillion-dollar bailout of the big banks. In the fall of 2008, economists across the spectrum warned that the country would face another Great Depression if the banks were not rescued. The country's political will and financial resources are now fully tapped.
Despite this fact, will the five conservative justices on the Roberts Court unleash yet more reckless banking activity by undercutting Dodd-Frank, again exposing the world economy to the deluge? We can only hope that at least one of the justices will think twice and make a "switch in time."
Michael Greenberger is a professor at the University of Maryland's Francis King Carey School of Law. This article, Copyright 2012 The Nation, is distributed by Agence Global.
