Three States Join Constitutional Challenge to Dodd-Frank
Washington, D.C., September 20, 2012 – The states of Oklahoma, South Carolina, and Michigan today joined a lawsuit challenging the constitutionality of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The states are asking the U.S. District Court for the District of Columbia to review the constitutionality of the Orderly Liquidation Authority, established under Title II of Dodd-Frank. The three states are joining the original plaintiffs in the lawsuit: State National Bank of Big Spring, Texas; the 60 Plus Association; and the Competitive Enterprise Institute.
“We must challenge Dodd-Frank to protect Oklahoma taxpayers and our financial stability. The law puts at risk the pension contributions and tax dollars that the people have entrusted us to protect,” Oklahoma Attorney General Scott Pruitt said. The Orderly Liquidation Authority (OLA) gives the Treasury Secretary the power to liquidate any financial company as along as the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve are in agreement.
“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 replaces the rule of law with the rule of politics,” Attorney General of South Carolina, Alan Wilson, said. The unbridled power given to the OLA to seize assets of private companies is simply unconstitutional. If a large financial institution fails, holding state pension contributions and tax dollars, the states have very little ability to recover their citizens’ assets.
“Michigan’s public-employee pension funds hold substantial fixed-income investments in large financial institutions,” said Michigan Attorney General Bill Schuette. “Dodd-Frank gives the U.S. Secretary of the Treasury essentially unlimited power – with no judicial or Congressional oversight – to pick winners and losers among creditors when these large financial institutions go bankrupt. This lawsuit is necessary to safeguard Michigan’s pension funds and protect current and future retirees.”
Sam Kazman, General Counsel for one of the original plaintiffs, CEI, stated: “Despite being called a reform measure, Dodd-Frank poses a massive threat to consumers, companies and the economy of this country. The scope of that threat is clearly demonstrated by the decision of these three states to join our lawsuit, and we welcome their participation.”
The state attorneys general are challenging Title II of Dodd-Frank, which gives the Treasury Secretary the ability to liquidate financial companies with only 24 hours notice. There is no meaningful legal recourse for the company, there is an immediate gag order placed on all parties and it carries criminal penalties if violated; in short, this creates death panels for American companies. The private plaintiffs also are challenging the Financial Stability Oversight Council (Title I), the Consumer Financial Protection Bureau (Title X), and the validity of the Bureau Director’s appointment.
The lawsuit was originally filed in June 21, 2012.
> View a copy of the complaint at CEI.org
> Information on the case and a copy of the filing can be found at http://cei.org/doddfrank.