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The New Financial Deal: Understanding Dodd-Frank and its Unintended Consequences

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About the Event: Under the new Dodd-Frank resolution rules, the U.S. Treasury—with the approval of the Federal Reserve and FDIC—has the power to take over a large financial institution that is “in default or in danger of default,” if the institution’s failure might have system-wide effects. Professor Skeel will explain how the resolution rules work, and critique the framework that places the FDIC—rather than a bankruptcy court—in charge of winding down large, complex, systemically important financial institutions. Professor Skeel argues that the best response to these shortcomings hard-wired into Dodd-Frank would be to give bankruptcy a chance, especially by reversing the special treatment that derivatives contracts currently receive in bankruptcy. Such reforms would do a better job of encouraging the managers of these institutions themselves to prepare for bankruptcy, rather than foist that process on to a government regulator.

Speakers: Prof David Skeel (Penn Law) and Prof Darrell Duffie (Stanford GSB)

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