The special bankruptcy procedure for large financial institutions may be a Trump target, according to a recent article in the New York Times. The Dodd-Frank’s bankruptcy provision, originally enacted in 2010 as a response to the financial crisis, allowed the banks who were essentially “too big to fail,” do just that.
Many of the proposals to create a new part of the bankruptcy code for banks have not offered any real solutions. The proposals provide no real way to deal with anything beyond a very specific form of bank failure.
If the bank fails in any way other than as predicted, the proposed legislation would be useless. This will in turn lead to a plea from Wall Street for bailouts. If that happens during a Trump administration, it will be interesting to see what happens next.
Who could have predicted the failure of Lehman Brothers or the near collapse of insurance giant, AIG? The financial panics caused by these collapses result in mass financial destruction- even when some degree of bailout is extended.
There is no doubt that without government assistance to both the banks and the automakers, the effects of 2008-09 would have been far worse.
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