WASHINGTON — The Trump administration on Wednesday refrained from proposing the elimination of authority to clean up failed financial behemoths, but the Treasury Department still wants substantial reforms to the resolution powers.

The Dodd-Frank Act authorized the government to place insolvent financial conglomerates in special receiverships — independent of the bankruptcy process — to avert systemic shock waves. But conservatives have consistently criticized the provision, arguing it could enable further bailouts, and have called for its repeal.

In Treasury's report, one of a series outlining recommendations for revamping the post-crisis regulatory framework, the administration recommended retaining Dodd-Frank's Orderly Liquidation Authority "as an emergency tool for use under only extraordinary circumstances."

Treasury Department building
The Treasury Department report acknowledged certain situations where an FDIC receivership would still be the best option. Bloomberg News

Yet the report outlined several proposals for limiting powers of the Federal Deposit Insurance Corp. in managing resolutions. These include stripping FDIC authority to treat similar creditors of a failed company differently, repealing the tax-exempt status of bridge companies, and using more private-sector lending to provide resolutions with liquidity.

In addition, the report proposed the creation of a new chapter in the bankruptcy code for financial companies.

"The Chapter 14 framework would preserve the key advantage of the existing bankruptcy process—clear, predictable, impartial adjudication of competing claims—while adding procedural features tailored to the unique challenges posed by large, interconnected financial companies," Treasury said in a press release. "These enhancements to the Bankruptcy Code would make the likelihood of having to use OLA even more remote."

Nevertheless, the Treasury acknowledged certain situations where an FDIC receivership would still be the best option.

"While bankruptcy must be the presumptive option, the bankruptcy of large, complex financial institutions may not be feasible in some circumstances, including when there is insufficient private financing. In those cases, a reformed OLA process—with predictable, clear allocation of losses to shareholders and creditors—is a far preferable alternative to destabilizing financial contagion or ad hoc government bailouts," the report said. "In addition, Treasury recognizes that, without the assurance of OLA as an emergency tool, foreign regulators would be more likely to impose immediate new requirements on foreign affiliates of U.S. bank holding companies, raising their costs of business and harming their ability to compete internationally."