As President Obama officially submitted Richard Cordray's renomination as director of the CFPB to Congress on Friday, eight states joined a suit challenging the constitutionality of key provisions of the Dodd-Frank Act — including its creation of the CFPB itself.
Obama initially appointed Cordray as CFPB head by means of a recess appointment in order to side-step Congress' objections to the nomination. However, a federal appeals court has since ruled that the appointment was unconstitutional, effectively brining into question virtually every measure taken by the CFPB with Cordray at its helm.
According to a report by Bank Credit News, Senate Republicans have said they will block Cordray's nomination unless changes are made to the agency's structure. The senators said that the CFPB currently concentrates too much power over the financial system in the hands of one individual.
One example of this power is highlighted in a complaint lodged by the state attorneys general in the multi-state lawsuit. They have joined the part of the lawsuit that allows the establishment under Dodd-Frank that would grant regulators the authority to liquidate a large failing bank, using taxpayer dollars to pay off the bank's creditors — according to the regulators' discretion. The taxes would later be recouped in fees charged to other major banks.
The eight attorneys-general joining the suit represent the interests of Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas and West Virginia, said a story by MarketWatch.
A key complaint of the AGs is that the Dodd-Frank was outlined in a statement by West Virginia Attorney General Patrick Morrisey: “The Orderly Liquidation Authority allows un-elected Washington bureaucrats to pick winners and losers among affected creditors, entirely abandoning the rule of law."
C. Boyden Gray, one of the attorneys who helped bring the original case said that the addition of the eight states attorneys general to the case gave it additional "gravitas" with the court.
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