Three state attorneys general have joined a lawsuit challenging the constitutionality of the Orderly Liquidation Authority under the Dodd-Frank Act, arguing that giving the Treasury secretary the power to liquidate any financial institution threatens consumers’ pension contributions.
Oklahoma, South Carolina and Michigan on Thursday joined the lawsuit filed in the U.S. District Court for the District of Columbia that asks the court to review the constitutionality of the Orderly Liquidation Authority, established under Title II of Dodd-Frank.
The three states, whose attorneys general are Republican, join the original plaintiffs in the lawsuit: State National Bank of Big Spring, Texas; the 60 Plus Association; and the Competitive Enterprise Institute (CEI), a group that advocates for limited government. The three original plaintiffs’ suit challenges the Consumer Financial Protection Bureau’s (CFPB) formation and operations. The CFPB was created under Dodd-Frank.
Sam Kazman, CEI’s general counsel, said in a statement, “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.”
Oklahoma Attorney General Scott Pruitt said in the same statement that “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.” He said the OLA gives the Treasury secretary the power to liquidate any financial company as long as the Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve are in agreement.
Alan Wilson, Attorney General of South Carolina, added that “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.”