Late Friday, the United State Supreme Court said it will hear a case that may have far more import for the mortgage banking community than most might realize upon first glance; Dow Jones reported after market close that the SCOTUS had agreed to consider whether the New York attorney general's office has the power to investigate whether some national banks have engaged in discriminatory mortgage lending in the state. In 2005, the NY AG's office, under the auspices of then-AG Eliot Spitzer, began a wide-ranging inquiry into residential mortgage lending practices within the state; the investigation was fueled by long-standing HMDA data that consumer advocates say provides proof of discriminatory lending practices against minority borrowers, with black and Hispanic borrowers allegedly more likely to receive high-cost loans than their white counterparts. Spitzer had demanded that numerous commercial banking giants, including Wells Fargo & Co. (WFC), J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C), disclose non-public information about their lending activities to his office, under the threat of legal action. A consortium of national banks, known as the Clearing House Association, as well as the Office of the Comptroller of the Currency, sued to block the NY AG's request under the grounds that state-level laws did not apply to federally-regulated banking entities. The federal banking pre-emption argument is one that has long simmered between and among regulators, banking executives, and consumer advocates, who have argued that lax federal oversight enabled national banks to discriminate against certain groups of borrowers. In early 2008, the OCC"s John Dugan spoke forcefully against such logic, saying that his office had in fact protected the national banking system from predatory abuses. “Predatory mortgage lenders have avoided national banks like the plague,” he said in a statement last February. “Almost everyone who has paid attention to the subprime lending crisis has concluded that OCC-regulated national banks were not the problem,” Dugan said. “Instead, the worst abuses came from loans originated by state-licensed mortgage brokers and lenders that are exclusively the responsibility of state regulators.” Apparently, now, that debate will be settled by the nation's highest court. Dow Jones reported that oral arguments in the case could begin as early as April. Write to Paul Jackson at Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.