Oklahoma, South Carolina and Michigan are all suing the federal government over the Dodd-Frank financial reform law, reports Bloomberg. Their complaint focuses on the Treasury Secretary’s ability to order the liquidation of a failing and systemically important financial institution — often referred to by those skeptical about the government’s willingness to actually do this as too-big-to-fail banks.
At the heart of the complaint, according to Bloomberg, is that the law “denies the subject company and its creditors constitutionally required notice and a meaningful opportunity to be heard before their property is taken.”
Perhaps not surprisingly, the Competitive Enterprise Institute, an anti-government think tank with ties to the Koch brothers, was the first to file the lawsuit. The states, all of which have Republican governors, joined in afterward. Their fear is that the government will be able to “pick winners and losers,” as South Carolina AG Alan Wilson told Bloomberg.
Perhaps that, or perhaps the government would like to avoid having to bail banks out once again, while letting some fail. Ask Bear Stearns and Lehman Brothers what they think about the bailout, then ask Citibank and Goldman Sachs. You’ll hear very different answers, because the government picked winners and losers the last time around, and perhaps would like to avoid doing so in the future.