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Mixed Messages Regarding OLA

posted by Stephen Lubben

Over at Dealb%k I talk about the confusing state of affairs regarding Dodd-Frank Orderly Liquidation Authority and the FDIC's new "single point of entry" (SPOE) approach to OLA. 2015-04-28 09.23.39 HDR

In short, since OLA expressly excludes depository banks, it is not clear that a SIFI can be placed into OLA based on the failure of its insured bank. One way around that problem might be to use the "source of strength" doctrine to trigger a default at the parent-company level.

Trick is that the the regulators have done nothing to develop the source of strength power Dodd-Frank gives them, and doing so is also in tension with their general disapproval of parent company guarantees and cross-default provisions. They argue that guarantees and cross-default provisions will undermine SPOE.

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