Bankruptcy

Resolution Authority -- Part 2 (The New Court)

By Stephen Lubben

This is a continuation of my series of posts on resolution authority -- Adam's got his series going too, but he's using Roman numerals.

Under the Dodd bill, petitions to invoke the resolution authority are to be presented to a new Liquidation Authority Panel. Under section 202 of the bill, the Panel is to be comprised of three Delaware bankruptcy judges, selected by the Chief Judge. Presently there are seven bankruptcy judges in Delaware, including the Chief.

This seems like too small of a pool to select the judges from, and Wilmington seems like an unlikely place to hold the kind of secret hearings contemplated in this legislation. Moreover, most of the key governmental, legal, and financial actors in these matters are based in New York.

Solution:  Create a nationwide court, based in New York, utilizing the best bankruptcy judges from around the country. Having a bigger pool also provides a source for alternate members if a particular member is unavailable when the Panel is called. The Panel can share infrastructure with the SDNY bankruptcy court. Since the Panel?s role is essentially administrative, you might even consider having a non-judge on the Panel (e.g., a legal or finance academic). Finally, perhaps there should be annual education requirements for panel members so they stay up to date with the latest developments.

Full post as published by Credit Slips on April 23, 2010 (boomark / email).