One of the criticisms of Title II [of the Dodd-Frank Wall Street Reform and Consumer Protection Act], however, is 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 FDIC’s typical response to this concern is that the statute guarantees creditors no less than the amount they would have received if the covered financial company had been liquidated under chapter 7 of the Bankruptcy Code.Read the complete Harvard Business Law Review article here.
This response is inherently flawed because it assumes that one could state objectively what a creditor’s probable recovery would be in a hypothetical chapter 7 case. All judgments of value are subjective, even if based to some extent on objective facts. It is for this reason that valuation disputes are among the most common forms of litigation in Bankruptcy Courts. However, Title II does not appear to provide any recourse to creditors who disagree with the FDIC’s determination of value in most contexts.*** If,through the rulemaking process, value determinations ... can be placed in the hands of independent third party arbiters, Title II may yet achieve parity with the Bankruptcy Code.
Showing posts with label Bankruptcy. Show all posts
Showing posts with label Bankruptcy. Show all posts
Tuesday, November 30, 2010
Achieving Parity With Bankruptcy Under Dodd-Frank
From the online version of the Harvard Business Law Review "One Way That Dodd-Frank’s Liquidation Authority Could Achieve Parity With The Bankruptcy Code" November 29, 2010, by Harvey R. Miller, Partner at Weil, Gotshal & Manges LLP, and Maurice Horwitz, Associate, at Weil, Gotshal & Manges LLP:
Wednesday, November 10, 2010
Obama's Lasting Negative Legal Legacy: GM, Chrysler Bankruptcies
From "GM, Chrysler bankruptcies created troubling legacy, legal scholars say" on November 10, 2010:
The complete paper is available here.
The Chrysler and General Motors bankruptcy reorganizations represented a sea change in corporate restructuring, one that could portend the end of our current system of bankruptcy reorganization, according to a published article by two University of Illinois experts in bankruptcy law.Read the complete post here.
Law professors Charles J. Tabb and Ralph Brubaker argue that the legal principles applied in the GM and Chrysler bankruptcies — two of the largest in U.S. history at $83.5 and $39.9 billion, respectively — were misguided, and ultimately have undermined the distributional norms of bankruptcy reorganizations.
The complete paper is available here.
Wednesday, September 1, 2010
Why The NY Fed Allowed Lehman To Fail
From the testimony of Thomas C. Baxter Jr., Executive Vice President and General Counsel of the Federal Reserve Bank of New York, on September 1, 2010, before the Financial Crisis Inquiry Commission, Washington, DC:
"Why did you allow Lehman to fail?" It is an understandable question, but one that nevertheless contains a false premise. The Federal Reserve did not "allow" Lehman Brothers to die, bankruptcy being the equivalent of death to a financial company. Instead, the Federal Reserve, the United States Treasury Department, the Securities and Exchange Commission (SEC), and others tried hard to save it—not for its own sake, of course, but for the sake of all the families and businesses who would be harmed by the devastating effects of a Lehman bankruptcy. We did not succeed, but the effort made was serious and determined. We came very close.Read Baxter's complete testimony on why the NY Fed could not and did not save Lehman Brothers from bankruptcy here.
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