The Edmond Sun

February 14, 2013

Oklahoma, other states challenge federal financial law


The Edmond Sun

OKLA. CITY — Eight states Wednesday joined Oklahoma, South Carolina and Michigan in a lawsuit challenging the constitutionality 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.” It 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.

Oklahoma Attorney General Scott Pruitt said Dodd-Frank shatters some of the most important rights citizens have in the marketplace and threatens states’ and citizens’ investments.

“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,” Pruitt said. “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.

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 Wednesday, 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 want the court to invalidate Dodd-Frank because of what the plaintiffs call unprecedented, unchecked power the law gives the federal 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.”

Montana Attorney General Tim Fox said the federal law is an alliance of big government and big business — Pennsylvania Avenue subsidizing Wall Street and suffocating Main Street.

“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,” Fox said. “It cements the ‘too big to fail’ approach and helps the biggest banks at the expense of consumers.”

Texas Attorney General Greg Abbott said his state is challenging Dodd-Frank because it gives too much power to the federal government and puts taxpayer dollars at risk.

Under the law, unelected federal bureaucrats are empowered to unilaterally liquidate financial institutions in which the state invests taxpayer dollars, Abbott said. It deprives the state of basic due process rights and places taxpayers’ resources at risk, he said.