Advancing a Free Society

More on Chapter 11F

Sunday, May 9, 2010

My column published last Monday May 3 in the Wall Street JournalHow to Avoid a ‘Bailout Bill’” generated a lot of questions about the idea of a "Chapter 11F," which I argued is a needed alternative to bailouts. Chapter 11F is a proposed modification or addition to Chapter 11 of the bankruptcy code. It would allow large non-bank financial firms to go through bankruptcy in an orderly and predictable way and thereby minimize disruptions to the financial markets and the economy. Currently there are several different versions of a Chapter 11F, but they all have the common theme of relying more on the bankruptcy law rather than on a new discretionary liquidation or resolution authority or on bailouts. By relying more on the rule of law, the reorganization or liquidation process would be more predictable.

Continue reading John Taylor on his blog Economics One