One of the principal lessons learned from the 2007-2009 financial crisis was the need for new legal regimes to facilitate the rapid and orderly resolution of systemically important financial institutions without a government bailout. In the final part of a six-part article that has just been published, I trace the development of these new legal regimes. The United States was itself a first mover in this regard with the enactment in 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).
The Dodd-Frank Act contains two provisions of singular importance to the resolution of … Read more
The 10th anniversary of the harrowing financial events of September 2008 is nearly upon us. The anniversary will undoubtedly be marked by various retrospectives analyzing those events. For a longer-term perspective, though, it may be helpful to consider another anniversary that will be observed in September 2018: the near failure of Long-Term Capital Management, L.P. and its fund, Long-Term Capital Portfolio, L.P. (collectively “LTCM”) 20 years ago. LTCM was the largest hedge fund operating in the United States and its brush with death provided a preview of some of the forces that would contribute to the near collapse of the … Read more
We may stand at the threshold (or is it precipice?) of repeal of important parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“the Dodd-Frank Act”) in the House of Representatives. (Prospects for repeal in the Senate seem much dimmer.) At the time of its enactment in 2010, the Dodd-Frank Act was regarded as the most important financial reform legislation since the time of the Great Depression. Now, scarcely seven years after its enactment, significant elements of the Dodd-Frank Act are targeted by the Republicans in the House of Representatives for outright repeal or significant modification in the … Read more
The latest chapter in the saga of resolution planning under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) unfolded in December 2016 when the Federal Deposit Insurance Corporation (the “FDIC”) and the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) released their assessments of the October 2016 resolution plan submissions made by five systemically important U.S. banking institutions. The October submissions were in response to FDIC and Federal Reserve Board determinations in April 2016 that identified deficiencies in the five institutions’ July 2015 resolution plans. In their December assessments, the FDIC … Read more
Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) represents a singular development in U.S. resolution law. It provides a new regime, the so-called Orderly Liquidation Authority, for use in the event that a systemically important U.S. financial company encounters severe financial distress. Like other provisions in the Dodd‑Frank Act, Title II was designed as a response to perceived inadequacies in U.S. legal and regulatory regimes during the financial crisis. Title II is intended to be available as an alternative to and substitute for a bankruptcy process, because a bankruptcy process was seen … Read more