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Legislation Could Follow Executive Order on Failing Bank Provision - ABI

President Donald Trump’s recent memorandum ordering the Treasury Department to examine the process for winding down failing banks — embedded in a landmark 2010 law — is reigniting questions on what could replace it, MorningConsult.com reported yesterday. GOP critics of Dodd-Frank’s Title II provision, known as orderly liquidation authority, say that it leaves the door open to taxpayer bailouts of big banks — the very thing the law aims to guard against. The OLA provision is meant to be a last-resort government backstop, allow a more stable wind-down process for failing banks. But Republicans say the provision legitimizes the concept of “too big to fail” institutions and motivates them to take on more risks. If Trump’s executive memo and its subsequent report lead to dismantling the wind-down process, enacted in the wake of the 2008 financial crisis, GOP lawmakers are armed with their own replacement plans. House Financial Services Committee Chairman Jeb Hensarling wants to take taxpayer dollars out of the equation entirely and put failing banks under the purview of the bankruptcy code. The Texas Republican on Friday praised the president’s executive memo, saying it aligns with his Dodd-Frank replacement legislation, the Financial CHOICE Act, which will be heard in the Financial Services Committee on Wednesday.

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