Challenging Dodd-Frank in Court
November 26, 2014
The Dodd-Frank Act has created a host of problems, for consumers, banks and other financial entities. According to the Financial Services Roundtable, there are now 40 percent fewer free checking accounts as a result of the law, and banks have seen large drops in annual earnings. The bill also requires 26,000 full-time employees devoted to paperwork compliance. The Economist notes that financial regulation, in general, has been unpredictable and opaque, with new Dodd-Frank regulations continuing to be developed years after its passage.
The Competitive Enterprise Institute (CEI) has actually filed a lawsuit in federal court challenging the Dodd-Frank Act, and oral arguments were heard in the case in November. Specifically, the suit focuses on the Consumer Financial Protection Board (CFPB) and the Financial Stability Oversight Council (FSOC). The CFPB has extensive control over the consumer finance industry, while FSOC has a great deal of power to regulate large financial companies. Iain Murray of CEI explains the plaintiffs' arguments:
- The CFPB is unaccountable to the other branches of government. Its $400 million annual budget comes not from Congress but from the Federal Reserve, leaving legislators without power over the agency's purse.
- Only in very limited circumstances can the president remove the CFPB director, limiting his ability to ensure that laws are "faithfully executed."
- Dodd-Frank tells courts to defer to CFPB legal interpretations, limiting judicial scrutiny of CFPB actions.
- FSOC can liquidate private companies, which CEI calls a violation of due process and the law's guarantee that bankruptcy laws will be "uniform."
Murray notes that there may be an effort among the new Congress to reform Dodd-Frank in 2015.
Source: Iain Murray, "Dodd-Frank Court Case Could Provide Injunctive Relief for America," The Blaze, November 18, 2014; "Capital Punishment," Economist, November 15, 2014.
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