The states of Michigan, Oklahoma, and South Carolina have sued the Obama Administration in the U.S. District Court for the District of Columbia over provisions of the Dodd-Frank Act that allow the government to seize financial institutions. Several private organizations joined in the legal complaint, to challenge also the constitutionality of the Act’s Consumer Finance Protection Bureau (CFPB) and the high-handed manner in which President Obama appointed the Bureau’s Director.  The legal challenge by the states and private organizations seeks to enforce constitutional limits on the ever more intrusive federal government.

The Heritage Foundation has written previously that the Dodd-Frank provisions for government takeover of financial institutions “trample upon the judicial branch, conceal court proceedings from the public, and deny financial institutions a reasonable opportunity to defend themselves in court.” Similarly, in their complaint, Michigan, Oklahoma, and South Carolina emphasize that “judicial review of the Secretary of the Treasury’s determinations either is subject to draconian limitations (in the case of the 24-hour proceedings available for a company contesting its own liquidation) or is prohibited altogether (with respect to five of the seven factors on which the lawfulness of the Secretary’s action turns . . .),” denying the “notice and a meaningful opportunity to be heard” that lies at the heart of the constitutional guarantee of due process of law.

With respect to the disastrous CFPB, The Heritage Foundation has noted before that the Dodd-Frank Act “creates a Consumer Financial Protection Bureau with too broad a mission, too little supervision, and a funding mechanism free of nearly all controls.” The private organizations made clear in the complaint that, “[b]y delegating effectively unlimited power to the CFPB, by eliminating Congress’s own ‘power of the purse’ over the CFPB, by eliminating the President’s power to remove the CFPB director at will, and by limiting the courts’ judicial review of the CFPB’s actions and legal interpretations, Title X of the Dodd-Frank Act violates the Constitution’s separation of powers.”

With regard to President Obama’s purported recess appointment of Richard Cordray as CFPB Director, Heritage alerted the public that it was an “unconstitutional attempt to circumvent the Senate’s advice-and-consent role” and a “breathtaking violation of the separation of powers and the duty of comity that the executive owes to Congress.”  Similarly, the complaint notes that, because “the Senate . . . was in session when President Obama nominated Mr. Cordray to the position of CFPB Director, and because the President nonetheless did not secure its ‘advice and consent’ for the Cordray nomination, Mr. Cordray’s appointment to the CFPB is unconstitutional.”

State attorneys general Bill Schuette of Michigan, Scott Pruitt of Oklahoma, and Alan Wilson of South Carolina, along with the State National Bank of Big Spring, the 60 Plus Association, and the Competitive Enterprise Institute, have taken the lead in challenging unconstitutional provisions of the Dodd-Frank Act, to preserve the separation of powers under the Constitution and to protect liberty from further government encroachment.  Their dedication to enforcing constitutional limits to prevent the federal government from reaching yet further into the lives of Americans merits appreciation and respect.