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Is a new Chapter 14 in the Bankruptcy Code for distressed financial companies near?

Full article,visit: http://news.morningstar.com/articlenet/SubmissionsArticle.aspx?submissionid=224977.xml


“Here, Conti-Brown lauded the Treasury department’s recommendation to create a new Chapter 14 in the Bankruptcy Code for distressed financial companies. A Treasury report released last week stated that Dodd-Frank’s provision of an Orderly Liquidation Authority (OLA) may be insufficient to deal with the unique challenges of large, interconnected financial companies. At the same time, the Treasury department recommended retaining the OLA “as an emergency tool for use under extraordinary circumstances,” but with “significant reforms” to the OLA process to address shortcomings.”

Conti-Brown and Cook described the Treasury department’s approach in addressing potential bank failures with the Chapter 14 provision as retaining “the baby and the bathwater.” Creating a separate pathway for bankruptcy makes sense, said Cook. “Financial firms or others would not reform if there were not this possibility [for bankruptcy], and if there were no possibility of failure,” said Cook. “There has to be orderly bankruptcy, and orderly reorganization.”