A lawsuit by 11 states and a Texas bank challenging the Dodd-Frank law’s financial regulation overhaul was dismissed by a federal judge.
U.S. District Judge Ellen Segal Huvelle in Washington Thursday ruled that the states and the State National Bank of Big Spring, Texas, didn’t have legal standing to bring their claims.
The plaintiffs “did not come close” to showing they would suffer financial injury a result of the overhaul, Huvelle wrote.
The lawsuit was filed in June, 2012, by the bank and the Competitive Enterprise Institute, a group that advocates for limited government, alleging that the law establishing the Consumer Financial Protection Bureau violates the U.S. Constitution because Congress doesn’t appropriate its budget, the president has limited ability to remove its director and the courts face restrictions in reviewing its actions.
In September 2012, states including South Carolina and Michigan joined the suit challenging the constitutionality of the 2010 Dodd-Frank Act that overhauled financial regulation.
The states, in an amended complaint, argued they were only challenging the portion of the Dodd-Frank law that empowers the Treasury Secretary to order a liquidation of a financial company whose collapse may threaten the stability of the banking system.
Dodd-Frank was enacted to curb the kinds of transactions that led to the 2008 financial crisis. It imposed new rules on derivatives, limits the ability of banks to trade on their own account and new rules for mortgages.
Gregory F. Jacob, a lawyer representing the plaintiffs, didn’t immediately respond to phone and e-mail messages after regular business hours seeking comment.
The case is State National Bank of Big Spring v. Geithner, 12-cv-01032, U.S. District Court, District of Columbia (Washington).
With assistance from Tom Schoenberg in Washington. Editors: Michael Hytha, Douglas Wong