BulletProofBlog the blog on crisis communications

Yesterday's Supreme Court ruling that state regulators can take national banks to court in order to enforce state consumer protection laws is yet another blow to the principle of "preemption." For those non-constitutional law scholars out there, preemption is the means by which federal law supersedes state law when contradictions between the two arise.

In this case, New York Attorney General Andrew Cuomo and his predecessor Eliot Spitzer sought to enforce state consumer protection laws against national banks that state regulators felt were engaging in various forms of predatory lending. The banks, and their regulators at the Treasury Department, argued that because national banks operate under federal charters they are exempt from state and local regulations.

Over the years, most big banks have dropped their state charters, choosing instead to be regulated by the federal Comptroller of the Currency. State regulators have loudly criticized the Comptroller for encouraging banks to obtain federal charters by offering less stringent regulation than what they faced at the state level.

Without getting into the merits of those arguments, it is clear that this latest Supreme Court ruling will have a profound impact on bank regulation nationwide and, more important, on the steadily growing power of state attorneys general.

In recent years, attorneys general, individually and collectively, have amassed unprecedented regulatory authority and have shown themselves to be increasingly eager to use it. In many cases, merely the threat of coordinated legal action by groups of attorneys general has been more than sufficient to force companies into expensive settlements in order to avoid protracted battles in court.

Among state politicians, there is a popular joke that "AG" now stands for "aspiring governor." And it is indeed common for state AGs to use the power and prominence of their offices to advance their political careers. Florida Governor Charlie Crist, Washington State Governor Christine Gregoire, former Arizona Governor (now Homeland Security Secretary) Janet Napolitano, and, of course, disgraced former New York Governor Sptizer are but a few recent examples.

In light of all this, and especially after this week' s Supreme Court ruling, any regulated business - and that' s just about every business these days - needs to be on the alert for what state AGs are saying and doing. With the blessing of the Supreme Court, state attorneys general are likely to be looking for all sorts of new regulatory fields to plow. Anyone could find themselves the next target. Unfortunately, thanks to a close vote by the Supreme Court, falling back on federal preemption in order to moderate and rationalize the nationwide regulatory environment is no longer a reliable option.

David Bartlett is a Senior Vice President at Levick Strategic Communications, an expert communications strategist and crisis manager, and a contributing author to Bulletproof Blog.