Yesterday the Senate Judiciary Committee held an essential hearing entitled “Big Bank Bankruptcy: 10 Years Just after Lehman Brothers.” Initially scheduled for October, but postponed mainly because of the debate more than the Kavanaugh confirmation, the hearing concentrated on legislation that would make a new “Chapter 14” of the bankruptcy code below which significant economic institutions could go into bankruptcy without having spreading the crisis to the rest of the economic technique. The concept came out of investigation by the Resolution Project at Stanford’s Hoover Institution, books such as Bankruptcy Not Bailout: A Specific Chapter 14, and lots of ideas, which includes by the witnesses at this hearing.
The hearing was substantial mainly because there was so a great deal assistance expressed in favor of Chapter 14. Right here is a video and written testimony. All 3 witnesses—Donald Bernstein of Davis Polk & Wardwell, Mark Roe of Harvard Law College, and Stephen Hessler of Kirkland & Ellis—were essentially in favor of Chapter 14. This assistance follows endorsement by the Administration in a thorough Report issued final February by the US Treasury. It also builds on unanimous assistance by the Home Judiciary Committee right after hearings held there final year. Considerably, most authorities are now fine with passing Chapter 14 without having also repealing Title II of Dodd-Frank. Repeal had previously been an impediment to bi-partisan assistance in the Senate. Now Title II can remain in the law, even if it will not be employed a great deal with Chapter 14 there.
In any case, there is now no really serious obstacle to passing Chapter 14 legislation, and although national consideration on yesterday’s hearing was nowhere close to that on the Kavanaugh hearings, the challenge is no much less essential. As Emily Kapur shows in a counterfactual, obtaining a Chapter 14 reform of the bankruptcy code could stop the catastrophic meltdown seasoned 10 years ago which devastated lots of people’s lives and left wreckage which we are nevertheless clearing up right after ten years.