FOR IMMEDIATE RELEASE
Wednesday, February 21, 2018
Contact: Nick Jacobs, 202-618-6430 or [email protected]
Washington, DC — Better Markets President and CEO Dennis Kelleher released this statement on the Treasury Department’s report on Orderly Liquidation Authority (OLA):
“We applaud the Treasury Department’s recognition today that Orderly Liquidation Authority (OLA) is a critical tool the government must have to combat future financial crises given that there are no limits on the size of gigantic financial firms and capital and liquidity levels are allowed to remain so low.
“When a gigantic too-big-to-fail financial firm is collapsing, is threatening to spread financial chaos throughout the country’s financial system, and all other measures have failed to stop it, the government must have the tools necessary to prevent domino-like failures from cascading through the entire financial system and causing a potential second Great Depression. That is why OLA is so important. It is a last-stop, failsafe mechanism to protect the country from a financial catastrophe. It can only be used after every other measure has failed, but the danger remains.
“While filing bankruptcy like every other firm in the country is preferable and must remain the first option, it is simply unlikely to be sufficient to resolve the financial collapse of the largest, most complex and interconnected global financial firms. Unlike most companies in bankruptcies, these too-big-to-fail firms simply don’t have the cash flow to provide sufficient ready liquidity to survive immediate collapse. Rather than having receivables, banks have run-ables, which will quickly result in a disorderly bankruptcy like Lehman Brothers in 2008, risking contagion and disaster.
“Importantly, used correctly, OLA will result in liquidation, but an orderly liquidation rather than a damaging disorderly liquidation. There must be no doubt that OLA will wipe out shareholders, convert certain debt to equity, extinguish claims, fire the Board of Directors and management, claw back compensation, and otherwise make the process as painful as possible for those who ran the company into ruin, particularly its most senior executives. Unlike 2008, OLA must not be an unaccountable bailout for underserving bankers. It must be an exacting penalty, where the CEO and others must be ejected in disgrace and, ideally, penurious.”
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.
