Harvey Miller and Maurice Horwitz have published an article in the Harvard Business Law Review Online, entitled “One Way That Dodd-Frank’s Liquidation Authority Could Achieve Parity With The Bankruptcy Code,” in which the authors discuss one of the criticisms of the orderly liquidation authority created by Dodd-Frank for the resolution of systemically important financial institutions – i.e., that creditors lack the same degree of certainty with respect to their probable treatment under an FDIC receivership as compared with the bankruptcy process. The authors argue that under Dodd-Frank, as it is currently drafted, any potential outcome for creditors under an FDIC receivership depends disproportionately more on the subjective value determinations of a single party — the FDIC receiver — than would ever be the case in a chapter 7 bankruptcy, and that for the process to achieve parity with the Bankruptcy Code, such value determinations should be placed in the hands of independent third party arbiters.
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Posted in Financial Regulatory Reform Center
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