![handle is hein.journals/hblro1 and id is 1 raw text is:
ONE WAY THAT DODD-FRANK'S LIQUIDATION AUTHORITY
COULD ACHIEVE PARITY WITH THE BANKRUPTCY CODE
Harvey R. IMiler andJMaurice Horwitz *
On October 19, 2010, the FDIC published a proposed rule governing the
implementation of Title II of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank).1 Title II of Dodd-Frank creates an orderly
liquidation authority for the resolution of systemically important financial
institutions. According to the FDIC's Notice of Proposed Rulemaking
Implementing Certain Orderly Liquidation Authority Provisions of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, [t]he liquidation rules of Title
II are designed to create parity in the treatment of creditors with the Bankruptcy
Code and other normally applicable insolvency laws.3
One of the criticisms of Title II, however, is that creditors lack the same degree
of certainty with respect to their probable treatment under an FDIC receivership as
compared with the bankruptcy process. The FDIC's typical response to this
concern is that the statute guarantees creditors no less than the amount they would
have received if the covered financial company had been liquidated under
chapter 7 of the Bankruptcy Code.4
This response is inherently flawed because it assumes that one could state
objectively what a creditor's probable recovery would be in a hypothetical
chapter 7 case. All judgments of value are subjective, even if based to some extent
on objective facts. It is for this reason that valuation disputes are among the most
common forms of litigation in Bankruptcy Courts. However, Title II does not
appear to provide any recourse to creditors who disagree with the FDIC's
Mr. Miller is a Partner, and Mr. Horwitz is an Associate, at Weil, Gotshal & Manges LLP.
Pub. L. No. 111-203, 124 Stat. 1376 (2010) (to be codified at 15 U.S.C. § 78o-7).
2 §§ 201-217.
3 75 Fed. Reg. 64,182, 64,175 (proposed Oct. 19, 2010) (to be codified at 12 C.F.R. pt. 380).
4 See §§ 210(a)(7)(B), (d)(2)(B).](ViewImageLocal?handle=hein.journals/hblro1&div=1&collection=&method=preview&ext=.png&size=3)
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