Overview

A centerpiece of Congress' effort to enact financial reform is the creation of the Orderly Liquidation Authority (the OLA) in Title II of the Dodd-Frank Bill. The OLA gives the federal government the authority to seize control of and break up large, interconnected financial companies deemed to be in danger of imminent failure. The legislative history of Title II clearly indicates that the OLA is meant to be used only in extraordinary circumstances, and the U.S. Bankruptcy Code (the Bankruptcy Code) remains the default insolvency regime for all entities other than insured depository institutions. When the OLA is invoked, Title II would give the Federal Deposit Insurance Corporation (the FDIC) the primary responsibility for liquidating a covered firm in a process that is substantially modeled on the Federal Deposit Insurance Act (FDIA), which sets out the insolvency regime for national banks and federally insured depository institutions. Once a company becomes subject to the OLA, it must be completely liquidated. Reorganization and a second life after the process runs its course are not contemplated by FDIA.

To read the analysis in full click ‘View Briefing’