A new report from the Bipartisan Policy Center released Tuesday said that "single point of entry" resolutions, a strategy favored by the Federal Deposit Insurance Corp., are a viable option to solve the "too big to fail" problem.
The single point of entry process involves resolving mammoth firms, in which the parent company is closed and subsidiaries are transferred to a bridge firm.
"In 2010, Dodd-Frank gave the government unprecedented power to seize a failing financial firm and put it through a special FDIC-managed resolution if officials thought its bankruptcy could wreck the financial markets. The 'single point of entry' plan supported by the FDIC would essentially wipe out shareholders of a failed holding company, and convert creditor claims into equity to recapitalize the bridge firm that inherited its subsidiaries," writes American Banker's Joe Adler.
John Bovenzi, formerly the FDIC's chief operating officer, says the single point of entry idea "is a tremendous step forward … for resolving too big to fail because it simplifies an enormously complex process."
For the full piece see "FDIC Wind-Down Plan Has Promise, But So Does Bankruptcy Reform: Paper" (may require subscription).
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