Wednesday, March 29, 2017

CONYERS Statement For Judiciary Markup Of H.R. 1667, The "Financial Institution Bankruptcy Act of 2017"

Dean of the U.S. House
of Representatives
John Conyers, Jr.
Mr. Chairman --  As you know, I am an original cosponsor of H.R. 1677, the “Financial Institution Bankruptcy Act of 2017.”  I agreed to cosponsor this legislation for several reasons.

To begin with, H.R. 1667 addresses a real need – recognized by regulatory agencies, bankruptcy experts, and the private sector – that the bankruptcy law must be amended so that it can expeditiously restore trust in the financial marketplace after the collapse of a systemically significant financial institution.

As many recall, the failure of Lehman Brothers and subsequent bankruptcy in 2008 caused a worldwide freeze on the availability of credit. This, in turn, triggered the near collapse of our Nation’s economy and clearly revealed that current bankruptcy law is ill-equipped to deal with complex financial institutions in economic distress.

H.R. 1667 would establish a specialized form of bankruptcy relief designed to facilitate the expeditious resolution of a large, systemically significant financial institution. 

Under the bill, the debtor’s operating subsidiaries would continue to function outside of bankruptcy, while the debtor’s principal assets, such as its secured property, financial contracts, and the stock of its subsidiaries, would be transferred to a temporary “bridge company.”

The bridge company, under the guidance of a trustee, would then liquidate these assets to pay the claims of the debtor’s creditors.  The bill would also temporarily prevent parties from exercising their rights in certain qualified financial contracts.  

Each critical step of this process would be done under the supervision of a bankruptcy judge and subject to appeal. 

Another reason why I support this bill is that it appropriately recognizes the important role the Dodd-Frank Act has in the regulation of large financial institutions.   

Without doubt, the Great Recession was a direct result of the regulatory equivalent of the Wild West.      

The Dodd-Frank Act goes a long way toward reinvigorating a regulatory system that makes the financial marketplace more accountable and, hopefully, more resilient.

In particular, Title II of the Dodd-Frank Act establishes a mandatory resolution process to wind down large financial institutions, which is a critical enforcement tool for bank regulators to ensure compliance with the Act’s heightened regulatory requirements.

H.R. 1667 is an excellent complement to Dodd-Frank Act’s resolution process and will help facilitate the rapid administration of a debtor’s assets in an orderly fashion that maximizes value and minimizes disruption to the financial marketplace. 

Finally, I am pleased to note that H.R. 1667 is the product of a very collaborative, inclusive, and deliberative process, which should be the norm, not the exception when it comes to drafting legislation. 

While an excellent measure, the bill unfortunately does not include any provision allowing the federal government to be a lender of last resort, which nearly every expert recognizes is a necessary element to ensure financial stability.

I recognize, however, that this is an issue not within the jurisdiction of the Judiciary Committee. 

Accordingly, I support H.R. 1667 and I yield back the balance of my time.

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