OKLAHOMA CITY – Attorney General Scott Pruitt on Wednesday announced Oklahoma and 10 other states filed an appeal of a lawsuit challenging the Dodd-Frank federal financial law. In appealing a lower court’s ruling, Oklahoma and the other states are seeking the opportunity to defend the interests of their citizens against the potential harmful effects of Dodd-Frank.
“Community banks, small business owners and anyone with a mortgage or checking account in Oklahoma are affected by Dodd-Frank. The law places too much power in the hands of federal regulators, whose decisions could have significant and lasting impact on the financial investments of Oklahomans,” said General Pruitt, who has led the national discussion of the constitutionality of Dodd-Frank. “Just as the Affordable Care Act has disrupted the health care industry, the Dodd-Frank law poses substantial risk to the financial industry and gives Oklahoma little ability to recover from the poor decisions of federal regulators. The state has an immediate need to protect its citizens from Dodd-Frank before the law harms the investments of citizens or the financial stability of the state. We are hopeful the court grants our request to allow this lawsuit to proceed.”
OK AG Scott Pruitt
State pension funds are creditors for many financial institutions, and if those institutions are liquidated by federal regulators rather than through bankruptcy, as called for under Dodd-Frank, the pension funds could face huge losses by being treated unfairly. A similar situation happened when the federal government bailed-out Chrysler in 2009. Then, the Indiana pension fund – which held a stake in Chrysler – was treated differently from other creditors and ultimately lost millions of dollars when Chrysler was restructured. Dodd-Frank poses a similar threat for Oklahoma’s pension funds.
A lower court dismissed the multistate lawsuit in 2013 claiming the states lacked standing to bring a legal action. In the appeal, the states’ claim, “… the district court erred in assuming that the States will not lose their rights unless and until they are mistreated in an ‘orderly liquidation.’ As a matter of fact, they already have lost their statutory rights as creditors. To focus exclusively on possible future financial losses, as the district court and Government did, is to fundamentally misunderstand the basic point of these creditors’ rights, which serve as the legal framework around which creditors and other stakeholders arrange their affairs today, before any company defaults.”
When the final bill was signed into law July 21, 2010, not only was it the most significant regulatory overhaul since the New Deal, but at almost 2,400 pages, it was more than twice the length of the three previous regulatory bills – the Securities Act of 1933, the Securities Exchange Act of 1934 and Sarbanes-Oxley – combined.
The Dodd-Frank legislation was passed in 2010 as a sweeping financial overhaul designed to “fix” the financial crisis.
In September 2012, Oklahoma, South Carolina and Michigan joined a lawsuit originally filed by a community bank, senior citizens advocacy group, and non-profit public policy group in U.S. District Court for the District of Columbia. In 2013, eight other states joined an amended challenge of the Dodd-Frank law. They are: Alabama; Georgia; Kansas; Montana; Nebraska; Ohio; Texas; and West Virginia.
The state attorneys general are specifically challenging Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which creates the “Orderly Liquidation Authority” and gives singular power to the Treasury Secretary to liquidate banks with only 24 hours’ notice and with no notice to creditors, including managers of state pension funds.
AG Pruitt spoke yesterday in Tulsa at the Republican Women’s Club in some detail on how the damage done Dodd-Frank has not gotten the coverage of Obamacare, but it is as destructive to citizen access to capital as the so-called Affordable Care Act is to health.