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The Senate, Chapter 14, and a General Lack of Seriousness

posted by Stephen Lubben

Word on the street is that a proposal to add a chapter to the Bankruptcy Code to deal with SIFIs will be introduced this morning in the Senate. 

I had a chance to look at an early draft. My initial thought is that its quite hard to take the proposal too seriously when its bookended by (a) repeal of Title II of Dodd-Frank, otherwise known as OLA, and (b) a prohibition on any government provided DIP lending in a "chapter 14" proceeding.

In short, take away OLA and make sure the new replacement can't work either. The DIP loan any of these institutions would need would be at least ten times the size of the GM DIP loan, the largest on record. And remember who had to provide that loan ...

Isn't it about time that we have a serious conversation about these issues?


Alas, adding a Chapter 14 would violate the rule: if it is in the Bankruptcy Code it is Odd. The exception proving it is chapter 12 - and only one exception is allowed to prove the rule.

Stephen, why on earth are you expecting facts and logic to matter? This is politics.

I have always assumed the the odd number pattern was to assist in maintaining the connotation of certain chapter numbers, particularly XI/11 and XIII/13, that had already become terms of art. I don't recall that I have ever heard that explicitly confirmed. Anybody know for sure?

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