Oklahoma Attorney General Scott Pruitt has joined 10 other states in filing a response to the federal government's motion to dismiss their case challenging a financial reform law passed in 2010.
The attorneys general said the Dodd-Frank financial reform law gives the federal government too much power in liquidating banks with short notice. The Justice Department on Feb. 22 asked a federal district court in the District of Columbia to dismiss the lawsuit originally filed by a Texas community bank and several conservative policy groups.
Pruitt and Republican attorneys general from Michigan and South Carolina joined the lawsuit in September. Eight other state attorneys general joined the lawsuit in February.
Pruitt said the federal government's motion to dismiss ignored constitutional issues raised by the Dodd-Frank law. The law's Orderly Liquidation Authority for financial companies gives just 24 hours notice to creditors, many of whom are managers of state pension funds.
“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 in a statement Thursday. “The law puts at risk the pension contributions and tax dollars that the people have entrusted us to protect.”
The state plaintiffs argued the Orderly Liquidation Authority would affect long-standing bankruptcy law that allows equal treatment of creditors. The federal government said the provision is only applicable if the Federal Reserve and FDIC don't object. The authority is intended to apply to large financial institutions that have taken on too much debt.
The state attorneys general are objecting to the Orderly Liquidation Authority section of the law. The original lawsuit challenges the constitutionality of the law's Financial Stability Oversight Council, the Consumer Financial Protection Bureau and the appointment of its director, Richard Cordray, without U.S. Senate confirmation.