WASHINGTON — Oklahoma Attorney General Scott Pruitt said Friday that he has joined a federal lawsuit challenging the constitutionality of a financial regulatory bill.
Pruitt told reporters on a conference call that a section of the 2010 financial reform bill known as Dodd-Frank gives unconstitutional authority to the secretary of Treasury to liquidate financial firms on short notice as long as the FDIC and the Federal Reserve don't object.
Pruitt and Republican attorneys general from Michigan and South Carolina said they were joining a lawsuit filed here by a community bank in Texas and two conservative groups. That lawsuit challenges several sections of the bill, while Pruitt said Oklahoma would join the action only on the part concerning the Orderly Liquidation Authority.
The attorneys general said the authority can put state investments at risk since, in shutting down a financial firm, the FDIC could decide which creditors would get their money.
House Republicans sought to repeal the Orderly Liquidation Authority earlier this year. Democrats on the House Financial Services Committee defended the authority as a way to “wind down failing firms while minimizing damage to the greater economy.”
Democrats said the authority “provides for a way to deal with large financial institutions that have become too indebted to exist.”
Pruitt's action on Friday came four years after the investment bank Lehman Brothers collapsed, one of the first developments of the financial crisis that led to a federal bailout of many banks and, later, the Dodd-Frank bill.
Pruitt said Congress used the crisis to consolidate power in Washington and eliminate the checks and balances required in the U.S. Constitution.