WASHINGTON — The federal government is claiming the eight state attorneys general who last week joined a lawsuit challenging the constitutionality of certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act lack the standing to do so.
In a brief response to the plaintiffs’ Feb. 15 motion for leave to file a second amended complaint in the U.S. District Court for the District of Columbia, the government said, in its view, the eight additional states that are attempting to join the suit “lack standing to assert their challenges and their claims are unripe.”
However, the government wrote in its five-page filing that “in the interest of expeditiously resolving” the litigation, it would not oppose the motion for leave to file a second amended complaint.
The eight states joining the lawsuit Wednesday were West Virginia, Montana, Texas, Georgia, Alabama, Kansas, Nebraska and Ohio.
West Virginia Attorney General Patrick Morrisey specifically cited Title II of the act, which creates the Orderly Liquidation Authority. It provides a process to liquidate a complex financial company that is close to failing as an alternative to bankruptcy.
The Federal Deposit Insurance Corporation is appointed as a receiver to carry out the liquidation and given several years to finish the process.
“Title II of the Dodd-Frank Act and the Orderly Liquidation Authority negatively impacts West Virginia and its taxpayers,” Morrisey said.
“The Orderly Liquidation Authority allows un-elected Washington bureaucrats to pick winners and losers among affected creditors, entirely abandoning the rule of law.”
He added that it “deprives West Virginia of its rights under federal bankruptcy laws to be treated fairly and equally. The executive branch, in its discretion, could choose to place the rights of other similarly situated creditors ahead of West Virginia.
“In addition to directly impacting West Virginia’s legal rights, this potentially jeopardizes millions of dollars in state pension funds and other state investments.”
In October, South Carolina, Oklahoma and Michigan joined the suit, which was originally filed in June by the State National Bank of Big Spring in Texas, the 60 Plus Association and the Competitive Enterprise Institute.
The plaintiffs allege there are no effective checks and balances in the law.
Dodd-Frank was signed into law in July 2010 and aimed to regulate the financial industry.
The suit also challenges the constitutionality of the Consumer Financial Protection Bureau, which was created by the law and is headed by former Ohio Attorney General Richard Cordray.
CEI attorney Hans Bader has said Cordray’s role “is like a czar.”
“He is not accountable to anyone and can’t be fired even if voters elect a president with different ideas about how to protect consumers,” Bader said in June.
However, Cordray’s employment could soon become a question following a court ruling that invalidated appointments made by President Barack Obama to the National Labor Relations Board.
Obama characterized them as recess appointments, but Republicans claimed they were holding sessions. Cordray was appointed at the same time.