More woes for Dodd-Frank as the 3 states of Oklahoma, South Carolina and Michigan joined a suit challenging the 2010 Dodd-Frank Act on Thursday, saying the law’s provisions for dealing with troubled financial institutions are a threat to financial stability.
The act’s Orderly Liquidation Authority gives the Treasury secretary the power to seize a financial firm if the government believes its failure would cause instability in the financial system. The Obama administration has utilized the OLA as means to solve the problem of government bailouts for firms seen as too big to fail.
This is ironic as the objective of the OLA is to prevent instability in the financial system, whereas the 3 states are claiming that the OLA itself is a threat to financial stability. As usual, the Dodd-Frank Act has failed to find middle ground to appease opposition, we should be watching this suit closely to see the impact on the future of this Act.