The Supreme Court
It facilitates national economic efficiency by facilitating bank efficiency; moderates local excesses that often can be detrimental to consumers and businesses. And it ensures the "dual banking system" really is a dual system and not one that is really, simply a state-by-state system. None other than the creator of the national banking system, one of our greatest presidents, Abraham Lincoln, fully understood this.
Lincoln was, above all else, a practical politician. But he was a visionary in many ways too — not least regarding finance and economics. He had an expansive sense of the public good and of the critical role financial institutions had to play in promoting, as he put it, "honest trade and honest labor." By that, he meant that a dollar should be worth a dollar — that people should get their money's worth, whether in their wages or in the goods they paid for with their hard-earned cash or in the currency issued by banks that were trustworthy and subject to government supervision.
Lincoln's personal experience with local banks operating under local authority was not a happy one. In 1840, the Bank of Illinois, chartered by the state, came close to failing due to bad investing and insider lending. In the years following the
That was the future president's epiphany. To the end of his days, his conviction never wavered that a strong national banking system, under uniform federal supervision and with uniform rules, was essential to the economic advancement of the nation and its people, both as earners and spenders. His vision bore fruit in the National Banking Acts of 1863 and 1864.
Uniformity — that was the key. Lincoln understood that with uniformity came efficiency, clarity and high national standards. Efficiencies allowed for lowered prices and better products and services. Clarity assisted businesses and consumers in understanding what products and services they were getting. And national standards have historically been high standards of safety, soundness and compliance in service of the economy and consumers.
Lincoln and his successors understood that a major threat to financial stability was for national entities to be prevented from obtaining the efficiencies and economic strength abiding by one set of laws provided. And, if the inefficiencies and consumer confusion Lincoln envisioned in a country of 35 states in 1863 was a problem, it is even more true today with 50 states spread from Hawaii to Maine and Texas to Alaska and with much more state-to-state mobility. Even more worrisome, imagine the inefficiency and confusion that could be created today if a nationally chartered entity were required to contend with the disparity of views between blue states and red states, where some states might seek to prevent an entity from providing a product or service that other states require. In the face of economic existential threats, a national banking system offers a counterweight in favor of national economic integration.
Acting Comptroller of the Currency Michael Hsu offered more details about forthcoming interagency rules to establish operational risk standards for large banks, including a focus on "critical operations" and third-party service providers.
Lincoln, for his part, would have preferred a single set of banks under uniform supervision and was quite prepared to act decisively to that end. But in the years since, we have created a working hybrid — one that cherishes the diversity of our federal republic but that also upholds the high standards of consumer protections that govern federally
chartered and supervised institutions.
The Office of the Comptroller of the Currency, the office Lincoln created to regulate national banks, has a proud history of advancing consumer well-being, as do the national banks it supervises. It championed the Community Reinvestment Act which has resulted in billions of dollars of loans and investments in low- and moderate-income communities. It brought lending discrimination suits when no one else would and cleansed the banking system of much, if not all, of its prior racial discrimination. It championed the development of Community Development Financial Institutions and in that regard, by refusing to let Chicago's South Shore Bank abandon a predominantly Black and poor neighborhood, it launched the grand dame CDFI. In terms of day-to-day consumer protection, it developed a strong Ombudsman program that was the precursor of programs ultimately mandated by Congress. And it has worked closely with other agencies, such as the Consumer Financial Protection Bureau, to improve consumer well-being in the financial area. It is safe to say that national bank standards have historically been the highest in the nation.
Were the courts to take away preemption
