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Camryn Hansen
Camryn Hansen
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Attorneys General to Obama: Resisting Federal Preemption is Our Number One Priority

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Last week, the National Association of Attorneys General (NAAG) issued an Interim Briefing Paper to the President-Elect Barack Obama Transition Team citing the resistance of federal preemption as its number one priority issue.

In the paper, the NAAG urges Obama’s transition team to “resist federal preemption of state laws, particularly as it relates to mortgage foreclosures, the credit crisis and the current economic situation.”

State Attorneys General have traditionally resisted federal preemption of state laws, whether by Congress, the Courts or the Executive Branch. Rather, state Attorneys General have supported a more pure federalism, a dual sovereignty whereby state governments and the federal government each retain and actively exercise the powers and functions of government at the same time. (…) It is a strongly held belief of the state Attorneys General that this shared jurisdiction contemplates the greatest consumer protection for citizens.

Of particular importance (…) at this time is resisting federal preemption in the enforcement of state banking and mortgage foreclosure laws. Preemption of state regulation by federal administrative agencies lead (sic) to irresponsible lending and contributed significantly to the ongoing mortgage and credit disasters at the heart of the recent financial crisis. In the current, failing economy, with housing prices plunging and the number of foreclosures soaring, it is critical that state Attorneys General continue to be “56 cops on the beat,” and be given the necessary regulatory authority to impose appropriate standards on lending institutions.

According to the paper, state attorneys general played a crucial role in negotiating Countrywide Financial Corporation’s recent $8.68 billion settlement for predatory lending practices (the largest predatory lending settlement in history); Ameriquest’s $295 million settlement for predatory lending; and Household Finance’s $484 million settlement for subprime lending. If their power to “enforce state laws on behalf of citizens” diminishes under the Obama administration, such acts of consumer protection will be more difficult, if not impossible, to achieve.

Though the NAAG’s preemption focus is economic this year, adopting a doctrine of resistance to federal preemption (which holds that when state and federal laws conflict, fed trumps state every time) would have huge ramifications for the FDA and prescription drugs. Earlier this month, citing a February 2008 decision that federal law preempts state product-liability lawsuits, a federal judge dismissed the cases of thousands of patients who suffered from (sometimes lethal) shocks due to malfunctioning Medtronic heart defibrillator wires. (Though the Supreme Court decision in Wyeth v. Levine has yet to come out, consumers fear that a pro-preemption verdict would give a dangerous carte blanche to drug makers, removing the “safety check” that litigation can provide when patients are harmed or even killed by FDA-approved prescription drugs.)

The word of the NAAG is good news for consumer protection. Here’s to hoping the Obama Transition Team follows through.