The Honorable Chairman Dodd
Committee on Banking, Housing and Urban Affairs
Washington, D.C. 20510
March 22, 2010
Dear Chairman Dodd:
The over 200 consumer, employee, investor, community and civil rights groups who are members of Americans for Financial Reform (AFR) would like to thank you for your strong efforts in passing comprehensive financial regulatory reform legislation. We recognize that this was a difficult task that required a delicate balance in addressing the needs of all interested parties. While we believe the Restoring American Financial Stability Act of 2010 needs to be improved in some critical areas, we believe the bill represents a major step towards holding the financial sector accountable and preventing another financial crisis.
The Committee is expected to vote on a number of amendments, some which will attempt to weaken the legislation and your efforts. We ask that you and Committee members oppose these amendments and in the alternative support amendments that will strengthen the legislation. Specifically, we ask that you support Amendment #104 offered by Senator Brown that seeks to clarify the rights of workers under an orderly liquidation outlined in Title II in the bill.
Resolution authority is needed so that there is a process for failing bank and financial holding companies that will end the government’s implicit guarantee that it will support failing institutions with taxpayer money. In general, we favor the approach apparent in the legislation, which is to provide for general authority to operate the company, adhere to agreements and pay obligations, and define the rules for disaffirmance of certain types of contracts where the relationship between the counterparties is more complex. However, revisions to the legislation are needed to better define the proposed resolution process in two principal areas related to employee obligations: 1) a priority for employee wages and 2) protection for labor agreements. These revisions are tailored to the distinct goals of the legislation, which emphasize streamlined resolution processes designed to protect financial stability.
A wage priority added to the list of unsecured claims will protect employees from the effects of an employer’s liquidation and to counter-balance the rights given to the debtor. Most recently, in 2005, Congress increased the wage priority in bankruptcy cases and added other amendments to safeguard employee payroll deductions for health and pension plan contributions and improve recovery for back-pay awards where companies violated federal and state laws. Adding a wage priority to this legislation will address similar concerns.
Additionally, the legislation provides generally that the Corporation, as receiver, may “disaffirm or repudiate” any contract determined to be “burdensome,” with special rules for certain types of contracts such as real estate leases, contracts of sale, personal service contracts and qualified financial contracts. However, there is no heightened standard for labor agreements. The Brown amendment states that the covered financial company shall not disaffirm or repudiate any collective bargaining agreement unless the Corporation determines that repudiation is necessary for the orderly resolution of the covered financial company.
For the above reasons, we urge your support for Brown Amendment #104. If you have any questions, please contact Greg Jefferson at email@example.com.
Americans for Financial Reform