Each state has pension funds in institutions regulated by the act, the complaint states, which are exposed to harm if the treasury secretary liquidates a bank. Each state is “ultimately liable” for the pension funds, so if the pension funds lose value because of actions permitted under Title II, the states could be forced to absorb the losses.

The states also argue that Title II violates the Due Process clause of the Fifth Amendment and the requirement in Article One of the Constitution that bankruptcy laws be “uniform.”

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