According to this Law.com article, the Dodd-Frank Wall Street Reform and Consumer Protection Act (signed 7/21/10) gives the FDIC the expanded power of taking over and liquidating any companies (other than banks) that it sees as a potential threat to the US financial system. While this may sound very specific, it is in actuality quite broad of a power to give - particularly hidden in a 2,300 page document.
Though already signed into law, the FDIC and legal community is still determining the fine points. However, the final discretion as to the use of this law will be the FDIC's. This is of particular note to bankruptcy law, as what has been told to companies in the past may no longer be true. Under current Chapter 11 bankruptcy, companies may attempt to reorgnaize and recover. However, under this law, the FDIC may step in and dissolve the company in such a way that its greatest value is brought forth.
As a further resulting issue, Wall Street is anxiously waiting for the true enactment of this power to be shown, as uncertainty in the legal and business community lend to hesitancy and waiving in the market.
The good news in all of this is that it has been promised that no more bailouts will be given. These will not turn into bailouts under a new title, either, as taxpayer money cannot be used towards the overtaking and dissolvement of firms under this act.
The recent economic times have directly contributed to this law's creation: many large companies have failed and disrupted our financial system, already precariously perched, even further. However, many question as to whether the FDIC is the proper agency for this enormous authority. The response to this from proponents is simply that the FDIC is not perfect or ideal, but it is the best possible authority to which this power may be given. In reality, given the lack of a general counsel currently at the FDIC, how can it truly be the best option?
Any time that this law is acted upon, the company in question will have the opportunity for review by the D.C. U.S. District Court. However, the court will only have 24 hours to rule before the FDIC's takeover is set. This appears to have been put in to give the idea of oversight with ery little actual review, as courts simply do not move that quickly.
There are definitely a great deal of questions created by this new legislation, with answers only to be discovered through practice in time.
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