TOPEKA – (February 13, 2013) – The State of Kansas today joined a legal challenge to a key provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Attorney General Derek Schmidt announced.
Kansas joined ten other states in challenging the provision of Dodd-Frank that gives the Secretary of the Treasury virtually unlimited power to order liquidation of financial institutions deemed “too big to fail.” The states’ challenge to Title II of Dodd-Frank claims that this new power given to the Treasury Secretary undermines the property rights of shareholders in large institutions, including holdings of the Kansas public pension system, and puts Kansas taxpayers at risk. Under Dodd-Frank, the Secretary of the Treasury has so-called Orderly Liquidation Authority, which essentially allows him or her to liquidate any company as long as the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve are in agreement.
“Under this sweeping new power, federal agencies could wield virtually unlimited power to circumvent the bankruptcy system and instead pick winners and losers among investors in large institutions without meaningful court supervision,” Schmidt said. “This lawsuit is necessary to safeguard Kansas’s pension funds, to protect current and future retirees, and to protect Kansas taxpayers who could be left holding the tab.”
The case is pending in the U.S. District Court of the District of Columbia. Other states joining with Kansas in the lawsuit are Alabama, Georgia, Ohio, Oklahoma, Nebraska, Michigan, Montana, South Carolina, Texas and West Virginia.