National banks won a major victory Tuesday when the Supreme Court ruled that the federal government, not states, has the pre-eminent role in regulating banks’ mortgage business, even if conducted by subsidiaries.

By a 5-3 vote in Watters v. Wachovia Bank, the Court found that the National Banking Act pre-empts state regulation of banks — and that the pre-emption extends to their subsidiaries, which the Court said are “equivalent” to the national banks themselves.

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