Bloomberg News

Dodd-Frank Foes Can’t Show Credible Threat, U.S. Says

November 20, 2012

A legal challenge to the 2010 Dodd- Frank Act should be dismissed because opponents of the law overhauling financial regulation haven’t identified how they’re being harmed or alleged any “credible and imminent threat” of enforcement, the U.S. told a federal judge.

The Justice Department, in a filing today in Washington, said challenges to provisions of the law that empower the Treasury Secretary to order the liquidation of a financial company and to the appointment of Richard Cordray to head the Consumer Financial Protection Bureau are premature.

“Despite the roving allegations of unconstitutionality set forth in the amended complaint, not one of the statutorily authorized actions that plaintiffs speculate might someday cause them harm has yet occurred,” Wendy Doty, a Justice Department lawyer, wrote in the 52-page filing.

The lawsuit was filed in June by a small bank in Texas and the Competitive Enterprise Institute, a group that advocates for limited government, alleging that the law setting up the CFPB violates the U.S. Constitution because Congress doesn’t appropriate its budget, the president has limited ability to remove its director and the courts face restrictions in reviewing its actions. The bank also challenged Cordray’s appointment.

States Challenge

In September, Oklahoma, South Carolina and Michigan joined the part of the lawsuit opposing the portion of the Dodd-Frank law that allows for the liquidation of a financial company whose collapse may threaten the stability of the banking system.

Defendants include Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler, as well as Cordray.

“We believe that the issues raised in this case are ripe, and that plaintiffs are entitled to adjudicate them,” Sam Kazman, CEI’s general counsel, said in an e-mailed statement. “Our basis for saying this will be fully set out in our response to the government’s motion.”

The case is State National Bank of Big Spring v. Geithner, 12-cv-01032, U.S. District Court, District of Columbia (Washington).

To contact the reporters on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net; Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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