A strange Supreme Court ruling written by Scalia

This ruling created some strange bedfellows. Anton Scalia, the court's most conservative member, switched over to join the court's four liberal members. In fact, Scalia wrote the opinion. The issue was whether the federal banking laws preempt similar state laws designed to protect consumers. From McClatchy News Service:

WASHINGTON — In a rebuke of the Bush administration, the Supreme Court ruled Monday that a federal bank regulator erred in quashing efforts by New York state to combat the kind of predatory mortgage lending that triggered the nation's financial crisis.

[...]

The five justices held that contrary to what the Bush administration had argued, states can enforce their own laws on matters such as discrimination and predatory lending, even if that crosses into areas under federal regulation.

Justice Clarence Thomas, writing for the four dissenters, argued that laws dating back to the nation's founding prevent states from meddling in federal bank regulation. He was joined by Chief Justice John G. Roberts and justices Anthony Kennedy and Samuel Alito.

The ruling angered many in the financial sector, who fear it'll lead to a patchwork of state laws that'll make it harder for banks and other financial firms to take a national approach to the marketplace.

"We are worried about the effect that this ruling could have on the markets," said Rich Whiting, general counsel for the Financial Services Roundtable, a trade group representing the nation's 100 largest financial firms, in a statement. The decision "hinders the ability of financial services firms from conducting business in the United States. Even worse, it will cause confusion for consumers, especially those who move from state to state."
[Highlighting mine - Editor WTF=o]

The reported statement [Highlighted above] from the financial sector is very likely accurate.

This decision WILL hinder the national banks from providing uniform services across the nation. It will certainly make it less economically beneficial to consolidate many local banks and create the kinds of mega-banks who helped the massive Wall Street banks create the mortgage crisis.

In other words, it removes some of the economies of scale that caused the creation of banks like Bank of America. That means that regional banks will be able to compete on a more equitable basis, and banking services will be provided in a more competitive market across the nation.

So does that mean that the megabanks will have higher costs and pass them on to the consumers? Half right. The higher costs will mean that there is less opportunity to make mega profits for the top managers. Along with that, the much greater competition will mean that the consumers will get lower prices than is possible when dealing with a single monopoly national bank, or with one of three or four oligopoly banks. Along with lower costs, the bankers will have greater knowledge of the needs of local markets than the mega banks possibly can, meaning the regional banks will have a shift of some competitive power away from the mega banks. The customers will win.

Too bad, Wall Street. You will have less opportunity to cause boom and bust economic cycles. Instead the free market will have the best opportunity to function.