The Bill Is Still Flawed
James Gattuso /
The latest word today is that the GOP is standing down from its standoff over the Senate’s financial-regulation bill. Specifically, word is that Republican leaders will now let the bill proceed to the floor, having received assurances that provisions for creditor bailouts will be removed. That’s not an insignificant improvement, despite the fact that President Obama has said that it is not “legitimate” to raise the issue of bailouts. But no one should think this bill is fixed. Far from it: Beyond the creditor bailout, I’ve counted at least 13 other problems with the plan. One of the most troubling is at the core of the bill: the creation of seizure authority — politely called “orderly liquidation authority” — for firms perceived by regulators to be failing. To be sure, orderly liquidation is a Good Thing. But the Senate bill achieves it by allowing federal regulators, with minimal judicial review, to take over troubled financial firms and wind up their affairs. It would be far better to use the time-tested bankruptcy system, with its legal protections and judicial supervision, to do the job. (more…)