WASHINGTON — The attorneys general of eight states are requesting to join a lawsuit that challenges the constitutionality of the Dodd-Frank Act and the Consumer Financial Protection Bureau.
The eight states will join the three already part of the suit, which was originally filed on behalf of a Texas community bank and two conservative groups.
The states joining the suit — Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas and West Virginia — argue that certain parts of Dodd-Frank are unconstitutional and hurt community banks, as well as giving too much power to "unelected" officials.
"The State of Texas is challenging Dodd-Frank because it gives too much power to the federal government — and puts taxpayer dollars at risk," said Texas Attorney General Greg Abbott in a press release announcing the decision. "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."
The case challenges many different sections of the financial reform law, including the sole-leadership structure of the CFPB, the president's authority to make a recess appointment to head the agency, and the powers and oversight of the Financial Stability Oversight Council.
The AGs are only targeting the so-called Orderly Liquidation Authority in Title II of the Dodd-Frank Act, which gives the secretary of the Treasury power to liquidate a financial institution without advanced warning. The AGs would then have to compete with other creditors to remit any funds lost, such as to their pensions.
The suit was first filed last June in the U.S. District Court for the District of Columbia. The original plaintiffs were a Texas community bank, State National Bank of Big Spring, as well as the 60 Plus Association and the Competitive Enterprise Institute. In September, three AGs also joined the case: from Oklahoma, South Carolina and Michigan. The defendants, which include nearly ever federal financial regulator, have filed for the case to be dismissed. The case is waiting for a response from the plaintiffs.