I don’t understand why Professor Levitin is attacking the OCC and FDIC for filing an amicus brief in an “obscure small business bankruptcy case to which a bank was not even a party.” The brief was an exceptional piece of drafting and analysis and the banking agencies do not deserve to be denigrated for a supposed lack of class here.
I get that Professor Levitin does not like the particulars of the loan in question but the legal issue the brief addresses—problems with the Second Circuit’s decision in Madden—is of tremendous importance to the national banking system. Indeed, in just the past few months, two class action lawsuits have been filed (wrongly) arguing that Madden should be applied to preclude securitization trusts from charging the same rates of interest as their sponsor banks could charge prior to the banks’ sales of credit card receivables to the trusts. If the plaintiffs were to prevail in their lawsuits, the disruption to the banking system and economy would be hard to exaggerate.
Professor Levitin seems troubled by his perception that the OCC and FDIC would like to see a Circuit split leading to Supreme Court review of the Madden holding. I don’t see the problem and, indeed, think that Supreme Court review would be welcome. If Professor Levitin’s view of Madden is correct, let the Supreme Court say so.
I note that Professor Levitin says nothing in his blog about the portion of the OCC/FDIC brief I found most compelling, that is, the argument that restrictions on the assignability of loans would be “disastrous” to the national banking system and that a bank’s right to charge the interest permitted by its home state would be “hollow” and “stunted” if a loan assignee could not charge the same interest as its bank assignor.
If Congress won’t act to address the Madden issue (and ultimately the related “true lender” doctrine)—and it is hard to believe that it will—the next best option is a Supreme Court decision.