The Federal Deposit Insurance Corp. plans to use Dodd-Frank's "orderly liquidation authority" to dismantle a troubled megabank, but experts worry the single-point resolution may be perceived as a stealth bailout by the government.
"Concerns about the perception of the FDIC plan known as 'single point of entry' came up during an engaging discussion Wednesday before a committee of top names in the financial services arena that advises the agency on resolution issues," writes American Banker's Joe Adler.
Under a plan detailed on Tuesday, the agency will wipe out a failed parent company along with shareholders while preserving and restructuring subsidiaries.
"This doesn't look like a liquidation. It looks like a restructuring or reorganization in which the systemically important financial institution survives to fight another day," said Arthur Wilmarth, a law professor at George Washington University. "Instead of liquidating or breaking up the institution it comes out the other end
looking much like it did before in terms of its functions and operations."
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