Business

Non-Bank Resolution Process: House v. Dodd

Daniel Indiviglio / Atlantic Online
The next stop as I continue to go through Senate Banking Committee Chairman Christopher Dodd's (D-CT) new financial reform proposal (.pdf) is how he intends to resolve too big to fail firms. As with most other sub-proposals I've discussed thus far, this one largely resembles what's found in the House bill. The big differences have to do with the creation of a "Orderly Liquidation Authority Panel" of bankruptcy judges to bless the resolution and the size of the fund to pay for it. Both proposals call for firms to create resolution plans. In each proposal, the Treasury Secretary, Federal Reserve Chairman, relevant regulator or the firm itself requests resolution. The firm's failure must pose a systemic risk to the U.S. economy in order to utilize this process instead of the bankruptcy code. The Federal Reserve Board and the relevant regulator's board or commission vote on whether or not to proceed. A two-thirds vote is required. All of this is essentially identical for both Dodd's and the House's versions.
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Posted by Editor at March 17, 2010 01:44 AM