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Trump Team to Recommend Keeping Dodd-Frank Liquidation Power - ABI

The Trump administration doesn’t plan to recommend stripping regulators of their power to seize and unwind a failing financial firm in a crisis, the Wall Street Journal reported. The Treasury Department, in a coming report on the Dodd-Frank provision known as the orderly liquidation authority (OLA), plans to propose changes to the policy without scrapping it wholesale, these people said. Repealing OLA would require an act of Congress. A recommendation from the Treasury to scrap the provision would have added firepower to Republican lawmakers’ calls to do so. Several senior Trump administration officials questioned OLA earlier this year, and House Republicans in June voted to scrap it as part of the Financial Choice Act, a broad deregulatory bill. That has fueled concerns among big banks and financial regulators who say the provision is a crucial alternative to taxpayer-funded bailouts. The Dodd-Frank provision empowered regulators to seize and liquidate a failing financial firm if it posed a threat to U.S. financial stability. It has never been put into practice. Instead of injecting taxpayer dollars into the company, as with the 2008 bailouts, officials would instead have the power to impose losses on shareholders, wipe out management, and liquidate toxic assets. They could use those powers only if bankruptcy wasn’t a viable option.

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