We continue our in-depth analysis of the draft bill released by FinServ Chairman Hensarling (R-TX) to rewrite broad swaths of the U.S. financial-regulatory framework. Moving from our analysis of his proposal to sweep away most prudential rules in favor of a ten percent leverage threshold, we turn now to his wholesale rewrite of the law’s orderly-liquidation authority (OLA) provisions and to those detailing how the FSOC may designate SIFIs or stipulate activities or practices that pose systemic risk warranting primary-regulator attention. OLA would be completely repealed in favor of a Bankruptcy Code rewrite similar to one introduced in the Senate. As a result, the FDIC would not manage SIFI or large-BHC failures and there would be limited backstop federal support in systemic situations.

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