According to a MarketWatch report, the attorneys general are all Republicans and represent Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas and West Virginia. The states are challenging the Dodd-Frank Act's ‘orderly liquidation authority’ provision that allows federal regulators to make payments to creditors and counterparties of a failing big bank as a means of preventing a domino chain of corporate failures. The lawsuit argues the provision is unconstitutional because it allows for the dismantling of banks ‘without meaningful judicial review.’
‘The orderly liquidation authority allows un-elected Washington bureaucrats to pick winners and losers among affected creditors, entirely abandoning the rule of law,’ says West Virginia Attorney General Patrick Morrisey.
The lawsuit was filed last year by State National Bank of Big Spring, Texas and two conservative action groups, and it also challenges the constitutionality of the Consumer Financial Protection Bureau (CFPB) and the recess appointment of its director, Richard Cordray. However, the attorneys general are not joining this part of the lawsuit.