CLLA Update GAO Review Legislative Proposals Covering Financial Company Bankruptcies
Sharon Edmondson, Washington Legislative Team Member | April 08, 2015
A report issued by the GAO entitled “Financial Company Bankruptcies: Information on Legislative Proposals and International Coordination” which is the fourth report issued under a mandate by the Dodd-Frank Wall Street Reform Act was released on March 19. The report addresses the recent changes to the Bankruptcy Code and efforts to improve cross-border coordination to facilitate liquidation of failed large financial companies under bankruptcy. According to the report the Financial Institution Bankruptcy Act of 2014 (HR 5421) and Taxpayer Protection and Responsible Resolution Act (S 1861) would have expanded the powers of the Board of Governors of the Federal Reserve and would have imposed a temporary stay on financial derivatives. Neither of these bills has been re-introduced in the 114th Congress.
Another legislative proposal would have more narrowly amended the Code. The 21st Century Glass-Steagall Act of 2013 (S. 1282, H.R. 3711), would have repealed safe-harbor provisions that allow most counterparties in a qualifying transaction with the debtor to exercise certain contractual rights even if doing so would otherwise violate the automatic stay.
These bills also would have added to the Code processes for the resolution of large, complex financial companies similar to provisions currently in the Orderly Liquidation Authority in Title II of the Dodd-Frank Act, which grants the FDIC the authority to resolve failed systemically important financial institutions under its receivership, according to the report.
The report is available at: http://www.gao.gov/assets/670/669089.pdf