The bankruptcy experts at CreditSlips are taking the debate over a proposed resolution authority for systemically important financial companies to a new level.

Adam Levitin sets the tone in a post saying that the Senate reform bill "gets things right on first principles: There needs to be some type of resolution authority, and it needs to provide the ability to impose haircuts on creditors." But it "goes way off the rails on a critical issue that has received virtually no discussion: how the resolution authorization process is supposed to work."

Levitin says decision-making authority would be too diluted. A systemic risk oversight council "sounds nice, sort of like the Justice League of financial regulation, but in practice it is likely to merely dilute accountability among regulators."

In a separate post, Stephen Lubben writes that the reform bill "does not provide for anyone comparable to the bankruptcy judge in a Chapter 11 case" but instead gives district courts the authority to review claims disputes. In many cases, that will be the District Court for the Southern District of New York, which "is widely perceived to be slow in reviewing bankruptcy appeals."

Lubben also thinks it is a mistake to limit membership of the proposed Liquidation Authority Panel to Delaware bankruptcy judges, given that there are only seven of them.

And he disputes the reform bill's inclusion of "safe harbors" that excuse derivatives from the resolution authority's normal operation. "Every legal academic that has considered the 'safe harbors' that excuse derivatives from the normal operation of the Bankruptcy Code has determined that these provisions increase systemic risk," he writes.