In December, the House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009. This reform measure could change the landscape of federal preemption for national banks and federal thrifts. Although it purports to codify Barnett Bank, it may severely limit the ability of regulators to preempt state laws by broad rules, as the OCC and OTS have previously done. Additionally, the bill would repeal Watters, eliminating preemption of state laws applicable to operating subsidiaries of national banks and federal thrifts, and it would give state AGs visitorial powers over these institutions.

Nevertheless, the bill represents a significant improvement over the original version due to a deal between House Financial Services Committee Chairman Barney Frank and moderate Democrats. Senator Christopher Dodd, Congressman Frank’s counterpart, is rumored to be close to releasing his own draft bill.