November 19, 2018
On behalf of Americans for Financial Reform (AFR), we are writing to express our opposition to the “Taxpayer Protection and Responsible Resolution Act” (TPRRA). Contrary to its name, this legislation actually gives special privileges to large financial institutions, encourages the continuation of “too big to fail”, and increases systemic risk. The attached bill analysis by Professor Adam Levitin of the Georgetown University Law Center explains the flaws in the TPRAA approach in detail.
The TPRRA makes some marginal improvements on previous versions of the bill. But as Professor Levitin’s analysis makes clear, it still shares the same fundamental flaw of creating a special “big banks only” lane in bankruptcy that is based on fundamentally unrealistic assumptions about the difficulties of resolving a large financial institution and grants first class treatment to financial insiders while putting everyone else at the back of the line.
In a recent Senate Judiciary Committee hearing, advocates of the TPRRA argued that it would increase accountability for executives of failed financial institutions. This is simply not true, not in comparison to current bankruptcy laws and especially not in comparison to the alternative of a Title II resolution under Dodd-Frank. As Professor Levitin’s analysis explains (Part E, page 4), the TPRRA allows the firm entering bankruptcy to preserve executive bonuses and “golden parachutes” by the simple expedient of selecting these liabilities to be transferred to a new bridge company, where they would be paid off out of funds preserved by shedding obligations to pension funds and governments. The high-speed bankruptcy process assumed in TPRAA – where key decisions must occur in a matter of hours – would deny due process to any who wished to question these transfers. And TPRAA contains none of the explicit provisions for clawing back executive bonuses or “golden parachute” severance payments that are mandated in the Title II resolution process in Dodd-Frank, which provides the most protections in this area.
TPRAA is an irresponsible form of resolution that would make the problem of “Too Big to Fail” worse, not better. We urge you to read the attached analysis to understand in detail why this is so. Congress should reject TPRAA and instead focus on proven means of ensuring bank solvency, such as increasing required capital levels, on oversight of the resolution planning process that prepares large banks for conventional bankruptcy, and on reforms to the Bankruptcy Code that reduce existing special preferences for large financial institutions.
For more information please contact AFR’s Policy Director, Marcus Stanley, at email@example.com or 202-466-3672.
 Americans for Financial Reform is an unprecedented coalition of more than 200 national, state and local groups who have come together to reform the financial industry. Members of our coalition include consumer, civil rights, investor, retiree, community, labor, faith based and business groups. A list of AFR members is available at https://ourfinancialsecurity.org/about/our-coalition/
 See previous AFR letter on Financial Institution Bankruptcy Act at https://ourfinancialsecurity.org/wp-content/uploads/2018/11/AFR-Opposition-Letter-to-Financial-Institution-Bankruptcy-Act.pdf