Financial reform bill does not bailout creditors

The argument that the government is providing bailouts to creditors ignores what part of this legislation does.  While I believe our current bankruptcy model can do the job of unwinding these firms, the legislation provides a modified bankruptcy process for covered financial companies; those capitalized at $50 billion or more.  The essence of bankruptcy has always been to liquidate assets and use revenues to pay creditors first.  That is not a bailout.  Also in corporate bankruptcies, debtor- in- possession financing is sometimes made available from some private entity.  The administration and Congress’ problem is that they are not making that clear.

One major concern of mine is leaving it up to a Treasury-led oversight council to determine which company is going to be pushed into the bankruptcy court in Delaware.  That is a decision that should be left to the company and its creditors.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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