ON-Lion Letter

In 2012, building off work first published in 2010, the Resolution Project of the Hoover Institution's Working Group on Economic Policy proposed that a new Chapter 14 be added to the Bankruptcy Code, exclusively designed to deal with the reorganization or liquidation of the nation's large financial institutions.  In Making Failure Feasible:  How Bankruptcy Reform Can End "Too Big to Fail," the contributors expand on their proposal to improve the prospect that our largest financial institutions -- particularly with prebankruptcy planning -- could be successfully reorganized or liquidated pursuant to the rule of law and, in doing so, both make resolution planning pursuant to Title I of Dodd-Frank more fruitful and make reliance on administrative proceedings pursuant to Title II of Dodd-Frank largely unnecessary.

Making Failure Feasible highlights the problems of dealing with large financial institutions in distress, without incurring either spillover distress to other institutions or relying on government bailout, and Chapter 14's responses to those twin issues, as well as recommending other measures that would facilitate successful resolutions.  Its contributors outline the basic features of Chapter 14 as originally proposed in 2012 vis-à-vis the reorganization or liquidation of an operating company, and they outline additional features to ensure the quick resolution of large financial institutions that would not depend on government discretion and would mesh with emerging ideas about cross-border resolution.

Then, they provide additional context for reform, outline the fundamental principles of such reform, show how it would work in practice -- and show how a Chapter 14 would be a substantial advance on administrative-focused resolution procedures.

In January, Hoover co-hosted an event on the book with the Bipartisan Policy Center.  It is viewable here.

The Lynde and Harry Bradley Foundation in Milwaukee supports Hoover's Working Group on Economic Policy, which is chaired by Bradley Prize recipient John B. Taylor.

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