Patton Boggs LLP has prepared a summary of the "Resolution Authority for Systemically Significant Companies Act of 2009" (or the "Act"), a proposed measure unveiled Thursday, March 26, 2009 by Treasury Secretary Geithner before the House Financial Services Committee. The resolution authority, to be headed by the Treasury Department, the Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve, would permit the U.S. government to reorganize or wind-down an institution that is deemed to be at risk of insolvency and that poses a threat to the U.S. financial stability. The Act applies to non-bank financial companies that have the potential to pose systemic risks to our economy but that are not currently subject to the resolution authority of the FDIC. By way of background, the measure is modeled after the FDIC’s existing resolution authority for commercial banks.
For your reference, the highlights of the Act summarized in the document include: (1) the definition of "financial company" (which includes insurance companies, among other nonbank entities); (2) the triggering test as to whether government action should be taken; (3) the factors that must be considered in determining whether an institution is in danger of default/insolvency; (4) the discretion of the government as to whether to place company in conservatorship or receivership; (5) the authority of the FDIC in conservatorship or receivership; and (6) the FDIC’s authority to handle claims from creditors.