…Co-sponsored by Reps. Spencer Bachus (R., Ala.), John Conyers (D., Mich.), and Bob Goodlatte (R., Va.), the bill creates a new section of the bankruptcy code for big financial firms. So far so good for taxpayers. Bankruptcy courts would be better for resolving failing giants than the “orderly liquidation authority” created by the 2010 Dodd-Frank law that allows regulators to rescue these institutions and then discriminate among their creditors.
This is no doubt why so many Republicans are supporting the new plan. But they should also read the fine print.
Nothing in the bill repeals the rescue authorities given to regulators under Dodd-Frank and there’s no ban on taxpayer assistance to the failing giants put through the new bankruptcy process.
If the idea is to take power from bureaucrats and give it back to markets and judges, it’s odd that not only the failing firm but also the Federal Reserve Board of Governors can trigger the bankruptcy filing if “necessary to prevent serious adverse effects on financial stability in the United States.” The affected company can contest the Fed’s decision privately before the court.
The House bill would also largely codify and expand an agreement this fall between the biggest banks and the Fed. The big banks agreed not to exercise all their contractual rights with each other, allowing a failing giant some relief as regulators try to ensure that its subsidiaries can keep operating…
Key takeaway, IMHO:
Big badness is coming, and this bill is designed to help “manage” it.
NB: As to you and yours, here’s what’s coming: