The Bipartisan Policy Center’s (BPC) Financial Regulatory Reform Initiative released a report titled Too Big to Fail: A Path Forward which analyzes whether the Bankruptcy Code and/or the Orderly Liquidation Authority (OLA) under Title II of the Dodd-Frank Act are able to provide the necessary tools to resolve large firms while avoiding contagious panic or resorting to taxpayer funded bailouts.
The report concludes that the FDIC’s proposed recapitalization strategy for failing but systemically important firms, carried out under the Dodd-Frank Act’s orderly liquidation authority or the bankruptcy code, should solve the “too big to fail” problem.
The report examined the FDIC’s proposed “single point of entry” recapitalization plan, which imposes losses on a financial firm’s shareholders and unsecured debt holders but not on taxpayers.
The report also includes recommendation on ways to improve regulation, reduce duplication and eliminate inefficiencies in resolution planning, the so-called ‘living wills’ put into place in Dodd-Frank.
Read the full report.