In a recent Wall Street Journal editorial, Senator Dodd’s proposed overhaul of financial regulatory legislation was criticized: “We already have an incredibly robust, time-tested “authority” to handle failing companies—the U.S. Bankruptcy Code. With decades of case law and precedent, it is sufficiently flexible to handle almost any type of insolvent company. The markets understand Chapter 11 and have confidence in the process. The bankruptcy proceedings of Washington Mutual, CIT, Enron, Drexel and even Lehman Brothers all attest to the vigor of Chapter 11. …Instead of inventing an elaborate new insolvency regime that will only amplify uncertainty in the financial markets, Congress should legislate specific fixes to the existing Bankruptcy Code. For instance, adding a provision to the Code that ensures a deliberate and methodical unwind of a derivatives book would substantially mitigate the volatile reverberations that give rise to financial crises. Congress could also enable the government to provide loans in limited instances to give troubled firms breathing room to stabilize their relationships. These changes—together with a universal requirement of daily marks-to-market to limit the buildup of unsecured risks—would minimize future costs to taxpayers and the financial system.”

Here is the link: http://online.wsj.com/article/SB20001424052748704117304575137980120672008.html

Michael