Attorney General Scott Pruitt late Wednesday filed a legal response to the federal government’s request to dismiss a multi-state lawsuit challenging the constitutionality and unchecked power of the Dodd-Frank financial act.
The state attorneys general are 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.
On Friday, the U.S. Justice Department filed a motion to dismiss the lawsuit, two days after eight states joined Oklahoma, South Carolina and Michigan in the lawsuit.
“The Justice Department’s claims are unfounded and miss the mark on the constitutional problems with Dodd-Frank. The act shatters some of the most important rights we have in the marketplace and threatens our state’s and our citizens’ investments,” Pruitt said. “The government simply ignored the states’ harm in this case and instead criticized a theory of standing that the state plaintiffs never advanced. Our taxpayers could bear enormous burdens in making up for lost assets that were intended for retired state employees or to otherwise fund government services and infrastructure. The law puts at risk the pension contributions and tax dollars that the people have entrusted us to protect.”
The Dodd-Frank Act was passed in 2010 as a sweeping financial overhaul designed to “fix” the financial crisis, but has been criticized for attacking community banks and other financial services not involved in the cause.
In September, Oklahoma, South Carolina and Michigan joined a lawsuit originally filed in June by a community bank, senior citizens advocacy group, and non-profit public policy group. The original lawsuit, filed in U.S. District Court for the District of Columbia, challenges the constitutionality of the Consumer Financial Protection Bureau (CFPB), the appointment of CFPB Director Richard Cordray without Senate advice and consent, and the constitutionality of the Financial Stability Oversight Council.
On Feb. 20, eight more states – Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas and West Virginia – joined the challenge to the Orderly Liquidation Authority in an amended complaint.
The private and state plaintiffs are requesting the Court invalidate Dodd-Frank because of the unprecedented, unchecked power it gives the government and the unforeseen damage it will do to America’s fragile economy and taxpayers’ wallets.
“Dodd-Frank replaces the rule of law with the rule of politics,” South Carolina Attorney General Alan Wilson said. “The new regulations do not stabilize our economy, they create greater uncertainty. As a result, states cannot allow our taxpayers, our investments or the Constitution to be subject to such financial risk.”
“Dodd-Frank is an alliance of big government and big business – Pennsylvania Avenue subsidizing Wall Street and suffocating Main Street,” Montana Attorney General Tim Fox said. “Montana’s community banks didn’t cause the 2008 financial crisis, but Dodd-Frank punishes them and our citizens who depend on them for credit to purchase a home, start a business, or go to college. It cements the ‘too big to fail’ approach and helps the biggest banks at the expense of consumers.”
“The State of Texas is challenging Dodd-Frank because it gives too much power to the federal government—and puts taxpayer dollars at risk,” Texas Attorney General Greg Abbott said. “Under this law, unelected federal bureaucrats are empowered to unilaterally liquidate financial institutions in which the state invests taxpayer dollars. This unprecedented regime deprives the State of Texas of basic due process rights and places taxpayers’ resources at risk.”