Wednesday, February 13, 2013

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Texas Joins Multi-State Challenge to Dodd-Frank

AUSTIN — Texas Attorney General Greg Abbott issued the following statement announcing that the State of Texas is joining the multistate challenge to the Obama Administration’s Dodd-Frank financial reform law:

“The Dodd-Frank law is bad for banks, harmful to businesses and worse for consumers who want to borrow money. It gives too much power to the federal government—and puts taxpayer dollars at risk. Under this law, unelected federal bureaucrats can unilaterally liquidate financial institutions in which the state invests taxpayer dollars. The State of Texas could be denied basic due process rights and taxpayers’ dollars could recklessly be put at risk.”

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Texas' challenge to Dodd-Frank

The legal action filed by the State of Texas and a coalition of 10 other states challenges Title II of Dodd-Frank, which gives the U.S. Treasury Secretary and the Federal Deposit Insurance Corporation (FDIC) broad, unilateral authority to simply take over and liquidate large financial institutions. Because the Texas Treasury Safekeeping Trust Company -- an organization that manages and invests funds for the state and various subdivisions -- has investments in financial institutions that fall within Dodd-Frank’s scope, the law poses a risk to taxpayer funds.

Under Dodd-Frank’s sweeping federal law, unelected federal officials are empowered to take virtually any action of their choosing—including liquidating a financial institution—without obtaining the approval or consent of creditors or shareholders like the State of Texas. The new federal regime is a highly secretive process that effectively prohibits the State from challenging this federal action in court.

The State of Texas is joined in the legal challenge by the States of Alabama, Georgia, Kansas, Michigan, Montana, Nebraska, Ohio, Oklahoma, South Carolina, and West Virginia, as well as the State National Bank of Big Spring, Texas, and the Plus 60 Association.