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A comparison of U.S. corporate and bank insolvency resolution

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  • Robert R. Bliss
  • George Kaufman
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    Abstract

    In the U.S., the insolvency resolution of most corporations is governed by the federal bankruptcy code and is administered by special bankruptcy courts. Most large corporate bankruptcies are resolved under Chapter 11 reorganization proceedings. However, commercial bank insolvencies are governed by the Federal Deposit Insurance Act and are administered by the FDIC. These two resolution processes—corporate bankruptcy and bank receiverships—differ in a number of significant ways, including the type of proceeding (judicial versus administrative); the rights of managers, stockholders, and creditors in the proceedings; the explicit and implicit goals of the resolution; the prioritization of creditors’ claims; the costs of administration; and the timeliness of creditor payments. This article elucidates these differences and explores the effectiveness of the procedural differences in achieving the stated goals.

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    Bibliographic Info

    Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

    Volume (Year): (2006)
    Issue (Month): Q II ()
    Pages: 44-55

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    Handle: RePEc:fip:fedhep:y:2006:i:qii:p:44-55:n:v.30no.2

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    Related research

    Keywords: Bankruptcy ; Bank failures;

    References

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    1. Walker F. Todd, 1994. "Bank receivership and conservatorship," Economic Commentary, Federal Reserve Bank of Cleveland, issue Oct.
    2. George G. Kaufman, 2004. "Depositor Liquidity and Loss Sharing in Bank Failure Resolutions," Contemporary Economic Policy, Western Economic Association International, vol. 22(2), pages 237-249, 04.
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    Cited by:
    1. Snezana Popovčić-Avrić & Vule Mizdraković & Marina Đenić, 2013. "Analysis of Financial Structure of the Serbian Banking Sector: Impact of the Financial Crisis," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 2(2), pages 81-92.
    2. Annemarie van der Zwet, 2011. "Crisis Management Tools in the EU: What Do We Really Need?," DNB Occasional Studies 902, Netherlands Central Bank, Research Department.
    3. repec:cbk:journl:v:2:y:2013:i:1:p:81-92 is not listed on IDEAS

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