The number of states challenging the constitutionality of Dodd-Frank has risen to eleven, as eight more claim the entity has worsened the idea of “too big to fail.”
Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas and West Virginia are among the eight additional states outspoken in their opposition to Dodd-Frank’s Title II, which gives the Secretary of the Treasury so-called Orderly Liquidation Authority (OLA).
By abridging the rights that federal bankruptcy laws long have guaranteed to creditors, OLA has been accused of stripping states of valuable property rights and the rule of law for states’ investments of taxpayers’ revenues and government employees’ savings.
With minimal accountability to Congress, the President or the courts, OLA has the authority to liquidate financial companies without advance warning.
The provision has earned criticism because the government decides how much to give investors during the liquidation process, with states having no ability to ensure that they can recoup the value of their investments.
Such criticism has deemed that Dodd-Frank perpetuates “too-big-to-fail” by harming community bank capacity to fund small businesses and job creation, further posing an increasing risk of a repeat economic meltdown.
The eight states join Oklahoma, South Carolina and Michigan, who are already involved in the lawsuit calling for a change to the validity of the OLA.
Written by Jason Oliva