One cheer for financial reform; more cheers could follow

he past week has seen important progress on legislative efforts for financial regulatory reform, including advances on both substantive and symbolic (but politically charged) issues.

Non-bank resolution is the most important substantive issue, and the agreement between Senate Banking Committee Chairman Chris Dodd and Ranking Member Richard Shelby resolves (so to speak) defects of the original Dodd proposal that would have fostered bailouts.

In essence, non-bank resolution will now allow the Federal Deposit Insurance Corporation (FDIC) to provide collateralized lending to a failing non-bank financial firm but require a vote of Congress to intentionally deploy public capital. Losses on the provision of liquidity will be clawed back from creditors to the extent that these counterparties receive more than would have been the case in a liquidation of the firm through a Chapter 7 bankruptcy proceeding. In other words, government money can be provided if it is well-collateralized, but if there are inadvertent losses, the counterparties who benefit are on the hook and not some deep-pocketed institutions that might make good political punching bags.

Read the full article on American.com

Phillip Swagel is a visiting scholar at AEI

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Phillip
Swagel

What's new on AEI

Expanding opportunity in America
image Moving beyond fear: Addressing the threat of the Islamic state in Iraq and Syria
image Foreign policy is not a 'CSI' episode
image The Air Force’s vital role
AEI on Facebook
Events Calendar
  • 21
    MON
  • 22
    TUE
  • 23
    WED
  • 24
    THU
  • 25
    FRI
Monday, July 21, 2014 | 9:15 a.m. – 11:30 a.m.
Closing the gaps in health outcomes: Alternative paths forward

Please join us for a broader exploration of targeted interventions that provide real promise for reducing health disparities, limiting or delaying the onset of chronic health conditions, and improving the performance of the US health care system.

Monday, July 21, 2014 | 4:00 p.m. – 5:30 p.m.
Comprehending comprehensive universities

Join us for a panel discussion that seeks to comprehend the comprehensives and to determine the role these schools play in the nation’s college completion agenda.

Tuesday, July 22, 2014 | 8:50 a.m. – 12:00 p.m.
Who governs the Internet? A conversation on securing the multistakeholder process

Please join AEI’s Center for Internet, Communications, and Technology Policy for a conference to address key steps we can take, as members of the global community, to maintain a free Internet.

Thursday, July 24, 2014 | 9:00 a.m. – 10:00 a.m.
Expanding opportunity in America: A conversation with House Budget Committee Chairman Paul Ryan

Please join us as House Budget Committee Chairman Paul Ryan (R-WI) unveils a new set of policy reforms aimed at reducing poverty and increasing upward mobility throughout America.

Event Registration is Closed
Thursday, July 24, 2014 | 6:00 p.m. – 7:15 p.m.
Is it time to end the Export-Import Bank?

We welcome you to join us at AEI as POLITICO’s Ben White moderates a lively debate between Tim Carney, one of the bank’s fiercest critics, and Tony Fratto, one of the agency’s staunchest defenders.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.