The Bankruptcy Code has existed in this country for well over a hundred years. Over this time, our bankruptcy system has evolved to become one of the most sophisticated regimes in the world. The bedrock principle embedded in the bankruptcy system of providing for the efficient resolution and reorganization of operating firms has allowed our economy to grow and flourish.
Nevertheless, a periodic evaluation of the Bankruptcy Code to ensure its adequacy to address the challenges posed by the changing nature of operating firms is one of the fundamental responsibilities of this Committee.
I applaud Chairman Bachus for holding today's hearing to examine whether the existing Bankruptcy Code is best equipped to address the insolvency of large and small financial institutions.
The bankruptcy process confers a number of benefits to all operating companies, including financial firms. The bankruptcy court provides transparency and due process to all parties involved. Furthermore, bankruptcy case law has been developed over decades, providing consistency and predictability.
Additionally, the bankruptcy process has been sufficiently dynamic to administer the resolution and restructuring of complex operating companies with billions of dollars in assets as well as smaller companies and individuals. But despite the bankruptcy system's ability to accommodate complex operating companies, financial firms may possess unique characteristics that are not yet optimally accounted for in the Bankruptcy Code.
For example, efficient and orderly resolution of financial firms can require an unusual level of speed. Refinements to the Code might be considered to better provide that speed while still assuring due process.
Additionally, in some circumstances the failure of financial firms can pose unique threats to the broader stability of the economy. To account for that, title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires certain firms to prepare "living wills" to plan for resolution in bankruptcy in the event of failure.
The Bankruptcy Code is well-crafted to maximize the recoveries of a debtor's creditors while providing an opportunity for the debtor to either reorganize or liquidate in an orderly fashion. It might, however, bear improvements designed specifically for the efficient execution of title I living wills.
These are some of the issues that may need to be examined as part of the broader evaluation of the existing Bankruptcy Code's adequacy to address financial institution insolvencies. I look forward to the testimony from today's excellent panel of witnesses on these important issues.