II 

113TH CONGRESS 

1ST SESSION S. 1861 

To save taxpayer money and end bailouts of financial institutions by providing 

for a process to allow financial institutions to go bankrupt. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 19, 2013 

Mr. CORNYN (for himself and Mr. TOOMEY) introduced the following bill; 

which was read twice and referred to the Committee on the Judiciary 

A BILL 

To save taxpayer money and end bailouts of financial institutions by providing for a process to allow financial institutions to go bankrupt. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Taxpayer Protection 

5 and Responsible Resolution Act’’. 

6 SEC. 2. REPEAL OF TITLE II OF DODD-FRANK WALL STREET 

7 REFORM AND CONSUMER PROTECTION ACT. 

8 (a) IN GENERAL.—Title II of the Dodd-Frank Wall 

9 Street Reform and Consumer Protection Act (Public Law 

10 111–203) is repealed and any Federal law amended by 


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1 such title shall, on and after the date of enactment of this 

2 Act, be effective as if title II of the Dodd-Frank Wall 

3 Street Reform and Consumer Protection Act had not been 

4 enacted. 

5 (b) CONFORMING AMENDMENTS.— 

6 (1) DODD-FRANK WALL STREET REFORM AND

7 CONSUMER PROTECTION ACT.—The Dodd-Frank 

8 Wall Street Reform and Consumer Protection Act is 

9 amended— 

10 (A) in the table of contents, by striking all 

11 items relating to title II; 

12 (B) in section 165(d)(6), by striking ‘‘, a 

13 receiver appointed under title II,’’; 

14 (C) in section 716(g), by striking ‘‘or a 

15 covered financial company under title II’’; 

16 (D) in section 1105(e)(5), by striking 

17 ‘‘amount of any securities issued under that 

18 chapter 31 for such purpose shall be treated in 

19 the same manner as securities issued under sec20 tion 208(n)(5)(E)’’ and inserting ‘‘issuances of 

21 such securities under that chapter 31 for such 

22 purpose shall by treated as public debt trans23 actions of the United States, and the proceeds 

24 from the sale of any obligations acquired by the 

25 Secretary under this paragraph shall be deposVerDate Mar 15 2010 04:39 Dec 24, 2013 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1861.IS S1861

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1 ited into the Treasury of the United States as 

2 miscellaneous receipts’’; and 

3 (E) in section 1106(c)(2)(A)— 

4 (i) in clause (i), by inserting ‘‘, other 

5 than a covered financial corporation (as 

6 defined in section 101(9A) of title 11, 

7 United States Code),’’ after ‘‘company’’; 

8 and 

9 (ii) in clause (ii), by inserting ‘‘, other 

10 than a covered financial corporation (as 

11 defined in section 101(9A) of title 11, 

12 United States Code),’’ after ‘‘company’’. 

13 (2) FEDERAL DEPOSIT INSURANCE ACT.—Sec14 tion 10(b)(3)(A) of the Federal Deposit Insurance 

15 Act (12 U.S.C. 1820(b)(3)(A)) is amended by strik16 ing ‘‘, or of such nonbank financial company super17 vised by the Board of Governors or bank holding 

18 company described in section 165(a) of the Finan19 cial Stability Act of 2010, for the purpose of imple20 menting its authority to provide for orderly liquida21 tion of any such company under title II of that Act’’. 

22 (3) FEDERAL RESERVE ACT.—Section 13(3) of 

23 the Federal Reserve Act (12 U.S.C. 343(3)) is 

24 amended— 

25 (A) in subparagraph (B)— 


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1 (i) in clause (ii), by striking ‘‘, resolu2 tion under title II of the Dodd-Frank Wall 

3 Street Reform and Consumer Protection 

4 Act, or’’ and inserting ‘‘or is subject to 

5 resolution under’’; and 

6 (ii) in clause (iii), by striking ‘‘, reso7 lution under title II of the Dodd-Frank 

8 Wall Street Reform and Consumer Protec9 tion Act, or’’ and inserting ‘‘or resolution 

10 under’’; and 

11 (B) by striking subparagraph (E). 

12 SEC. 3. GENERAL PROVISIONS RELATING TO COVERED FI13 NANCIAL CORPORATIONS. 

14 (a) DEFINITION.—Section 101 of title 11, United 

15 States Code, is amended by inserting the following after 

16 paragraph (9): 

17 ‘‘(9A) The term ‘covered financial corporation’ 

18 means any corporation incorporated or organized 

19 under any Federal or State law, other than a stock20 broker, a commodity broker, or an entity of the kind 

21 specified in paragraph (2) or (3) of section 109(b), 

22 that is— 

23 ‘‘(A) a bank holding company, as that 

24 term is defined in section 2(a) of the Bank 


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1 Holding Company Act of 1956 (12 U.S.C. 

2 1841(a)); or 

3 ‘‘(B) predominantly engaged in activities 

4 that the Board of Governors of the Federal Re5 serve System has determined are financial in 

6 nature or incidental to such financial activity 

7 for purposes of section 4(k) of the Bank Hold8 ing Company Act of 1956 (12 U.S.C. 

9 1843(k)).’’. 

10 (b) APPLICABILITY OF CHAPTERS.—Section 103 of 

11 title 11, United States Code, is amended— 

12 (1) in subsection (a)— 

13 (A) by striking ‘‘section 1161’’ and insert14 ing ‘‘sections 1161 and 1401’’; and 

15 (B) by striking ‘‘or 13’’ and inserting ‘‘13, 

16 or 14’’; and 

17 (2) by adding at the end the following: 

18 ‘‘(l) Chapter 14 of this title applies only in a case 

19 under this title concerning a covered financial corporation. 

20 ‘‘(m) Except as otherwise provided in chapter 14 of 

21 this title, chapter 11 of this title applies in a case under 

22 chapter 14 of this title.’’. 

23 (c) WHO MAY BE A DEBTOR.—Section 109 of title 

24 11, United States Code, is amended— 

25 (1) in subsection (b)— 


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1 (A) in paragraph (2), by striking ‘‘or’’ at 

2 the end; 

3 (B) in paragraph (3)(B), by striking the 

4 period at the end and inserting ‘‘; or’’; and 

5 (C) by adding at the end the following: 

6 ‘‘(4) a covered financial corporation.’’; and 

7 (2) by adding at the end the following: 

8 ‘‘(i) An entity may be a debtor under chapter 14 of 

9 this title only if the entity is a covered financial corpora10 tion.’’. 

11 SEC. 4. LIQUIDATION, REORGANIZATION, OR RECAPITAL12 IZATION OF A COVERED FINANCIAL COR13 PORATION. 

14 (a) IN GENERAL.—Title 11, United States Code, is 

15 amended by inserting before chapter 15 the following: 

16 ‘‘CHAPTER 14—LIQUIDATION, REORGA17 NIZATION, OR RECAPITALIZATION OF 

18 A COVERED FINANCIAL CORPORATION 

‘‘Sec. 

‘‘1401. Inapplicability of other sections. 

‘‘1402. Definitions for this chapter. 

‘‘1403. Commencement of a case concerning a covered financial corporation. 

‘‘1404. Regulators. 

‘‘1405. Special trustee and bridge company. 

‘‘1406. Special transfer of property of the estate. 

‘‘1407. Automatic stay; assumed debt. 

‘‘1408. Treatment of qualified financial contracts and affiliate contracts. 

‘‘1409. Licenses, permits, and registrations. 

‘‘1410. Exemption from securities laws. 

‘‘1411. Inapplicability of certain avoiding powers. 


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1 ‘‘§ 1401. Inapplicability of other sections 

2 ‘‘Sections 321(c) and 322(b) do not apply in a case 

3 under this chapter. 

4 ‘‘§ 1402. Definitions for this chapter 

5 ‘‘In this chapter, the following definitions shall apply: 

6 ‘‘(1) The term ‘Board’ means the Board of 

7 Governors of the Federal Reserve System. 

8 ‘‘(2) The term ‘bridge company’ means a newly 

9 formed corporation the equity securities of which are 

10 transferred to a special trustee under section 

11 1405(a). 

12 ‘‘(3) The term ‘capital structure debt’ means 

13 debt, other than a qualified financial contract, of the 

14 debtor for borrowed money with an original maturity 

15 of at least 1 year. 

16 ‘‘(4) The term ‘contractual right’ means a con17 tractual right as defined in section 555, 556, 559, 

18 or 560. 

19 ‘‘(5) The term ‘qualified financial contract’ 

20 means any contract of a kind specified in paragraph 

21 (25), (38A), (47), or (53B) of section 101, section 

22 741(7), or paragraph (4), (5), (11), or (13) of sec23 tion 761. 


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1 ‘‘§ 1403. Commencement of a case concerning a cov2 ered financial corporation 

3 ‘‘(a) A case under this chapter may be commenced 

4 by the filing of a petition with the bankruptcy court— 

5 ‘‘(1) under section 301; or 

6 ‘‘(2) by the Board, only if— 

7 ‘‘(A) the Board certifies in the petition 

8 that it has determined that— 

9 ‘‘(i) the covered financial corpora10 tion— 

11 ‘‘(I) has incurred losses that will 

12 deplete all or substantially all of the 

13 capital of the covered financial cor14 poration, and there is no reasonable 

15 prospect for the covered financial cor16 poration to avoid such depletion; 

17 ‘‘(II) is insolvent; 

18 ‘‘(III) is not paying or is unable 

19 to pay the debts of the covered finan20 cial corporation (other than debts sub21 ject to a bona fide dispute as to liabil22 ity or amount) as they become due; or 

23 ‘‘(IV) is likely to be in a financial 

24 condition specified in subclause (I), 

25 (II), or (III) sufficiently soon such 

26 that the immediate commencement of 


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1 a case under this chapter concerning 

2 the covered financial corporation is 

3 necessary to prevent imminent sub4 stantial harm to financial stability in 

5 the United States; and 

6 ‘‘(ii) the commencement of a case 

7 under this chapter concerning the covered 

8 financial corporation and the effect of a 

9 transfer under section 1406 is necessary to 

10 prevent imminent substantial harm to fi11 nancial stability in the United States; and 

12 ‘‘(B) the bankruptcy court determines, 

13 after a hearing described in subsection (b), that 

14 the Board has shown by a preponderance of the 

15 evidence that the requirements under subpara16 graph (A) have been satisfied. 

17 ‘‘(b)(1) A hearing described in this subsection is a 

18 hearing held not later than 12 hours after the Board 

19 makes a certification under subsection (a)(2)(A), with no20 tice only to— 

21 ‘‘(A) the covered financial corporation; 

22 ‘‘(B) the Federal Deposit Insurance Corpora23 tion; and 

24 ‘‘(C) the Secretary of the Treasury. 


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1 ‘‘(2) Only the Board and the entities listed in para2 graph (1) may attend or participate in a hearing described 

3 in this subsection. Transcripts of such hearing shall be 

4 sealed until the end of the case. 

5 ‘‘(c)(1) The covered financial corporation may file an 

6 appeal in the district court of a determination made by 

7 the bankruptcy court under subsection (a)(2)(B) not later 

8 than 12 hours after the bankruptcy court makes such de9 termination, with notice only to the entities listed in sub10 section (b)(1) and the Board. 

11 ‘‘(2) The district judge specified under section 

12 298(c)(1) of title 28 for the judicial circuit in which the 

13 case is pending shall hear the appeal under paragraph (1) 

14 and review within 12 hours the determination of the bank15 ruptcy court under subsection (a)(2)(B) for abuse of dis16 cretion. 

17 ‘‘(d)(1) The commencement of a case under sub18 section (a)(1) constitutes an order for relief under this 

19 chapter. 

20 ‘‘(2) In a case commenced under subsection (a)(2), 

21 the bankruptcy court shall immediately order relief under 

22 this chapter if— 

23 ‘‘(A) the bankruptcy court makes a determina24 tion under subsection (a)(2)(B) that the requireVerDate Mar 15 2010 04:39 Dec 24, 2013 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1861.IS S1861

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1 ments of subsection (a)(2)(A) have been satisfied; 

2 and 

3 ‘‘(B)(i) the period for appeal under subsection 

4 (c)(1) has passed without an appeal having been 

5 filed; or 

6 ‘‘(ii) the district court affirms the determina7 tion of the bankruptcy court under subsection (c)(2). 

8 ‘‘(3) Notwithstanding paragraph (2), the bankruptcy 

9 court shall order relief in a case commenced under sub10 section (a)(2) if the debtor consents to the order. 

11 ‘‘§ 1404. Regulators 

12 ‘‘(a) The Board may raise and may appear and be 

13 heard on any issue in any case or proceeding under this 

14 title relevant to the regulation of the debtor by the Board 

15 or to financial stability in the United States. 

16 ‘‘(b) The Federal Deposit Insurance Corporation may 

17 raise and may appear and be heard on any issue in any 

18 case or proceeding under this title in connection with a 

19 transfer under section 1406. 

20 ‘‘§ 1405. Special trustee and bridge company 

21 ‘‘(a) On request of the trustee or the Board, the court 

22 may order the trustee to appoint 1 special trustee and 

23 transfer to the special trustee all of the equity securities 

24 in a corporation to hold in trust for the sole benefit of 

25 the estate, if— 


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1 ‘‘(1) the corporation does not have any prop2 erty, executory contracts, unexpired leases, or debts, 

3 other than any property acquired or executory con4 tracts, unexpired leases, or debts assumed when act5 ing as a transferee of a transfer under section 1406; 

6 ‘‘(2) the equity securities of the corporation are 

7 property of the estate; and 

8 ‘‘(3) the court approves— 

9 ‘‘(A) the trust agreement governing the 

10 special trustee; 

11 ‘‘(B) the governing documents of the cor12 poration; and 

13 ‘‘(C) the identity of— 

14 ‘‘(i) the special trustee; and 

15 ‘‘(ii) the directors and senior officers 

16 of the corporation. 

17 ‘‘(b) The trust agreement governing the special trust18 ee shall provide— 

19 ‘‘(1) for the payment of the costs and expenses 

20 of the special trustee from the assets of the trust 

21 and not from the property of the estate; 

22 ‘‘(2) that the special trustee provide— 

23 ‘‘(A) periodic reporting to the estate; and 

24 ‘‘(B) information about the bridge com25 pany as reasonably requested by a party in inVerDate Mar 15 2010 04:39 Dec 24, 2013 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1861.IS S1861

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1 terest to prepare a disclosure statement for a 

2 plan providing for distribution of any securities 

3 of the bridge company, if such information is 

4 necessary to prepare such disclosure statement; 

5 ‘‘(3) that the special trustee provide notice to 

6 and consult with parties in interest in the case in 

7 connection with— 

8 ‘‘(A) any change in a director or senior of9 ficer of the bridge company; 

10 ‘‘(B) any modification to the governing 

11 documents of the bridge company; and 

12 ‘‘(C) any major corporate action of the 

13 bridge company, including— 

14 ‘‘(i) recapitalization; 

15 ‘‘(ii) a liquidity borrowing; 

16 ‘‘(iii) termination of an intercompany 

17 debt or guarantee; 

18 ‘‘(iv) a transfer of a substantial por19 tion of the assets of the bridge company; 

20 or 

21 ‘‘(v) the issuance or sale of any secu22 rities of the bridge company; 

23 ‘‘(4) that the proceeds of the sale of any equity 

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1 ee be held in trust for the benefit of or transferred 

2 to the estate; and 

3 ‘‘(5) that the property held in trust by the spe4 cial trustee is subject to distribution in accordance 

5 with the plan and subsection (c). 

6 ‘‘(c) The special trustee shall distribute the assets 

7 held in trust in accordance with the plan on the effective 

8 date of the plan, after which time the office of the special 

9 trustee shall terminate, except as may be necessary to 

10 wind up and conclude the business and financial affairs 

11 of the trust. 

12 ‘‘(d) After a transfer under section 1406, the special 

13 trustee shall be subject only to applicable nonbankruptcy 

14 law, and the actions and conduct of the special trustee 

15 shall no longer be subject to approval by the court in the 

16 case under this chapter. 

17 ‘‘§ 1406. Special transfer of property of the estate 

18 ‘‘(a) On request of the trustee or the Board, and after 

19 notice and hearing and not less than 24 hours after the 

20 commencement of the case, the court may order a transfer 

21 under this section of property of the estate to a bridge 

22 company. Except as provided under this section, the provi23 sions of section 363 shall apply to a transfer under this 

24 section. 


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1 ‘‘(b) Unless the court orders otherwise, notice of a 

2 request for an order under subsection (a) shall consist of 

3 electronic or telephonic notice of not less than 24 hours 

4 to— 

5 ‘‘(1) the debtor; 

6 ‘‘(2) the trustee; 

7 ‘‘(3) the holders of the 20 largest secured 

8 claims against the debtor; 

9 ‘‘(4) the holders of the 20 largest unsecured 

10 claims against the debtor; 

11 ‘‘(5) the Board; 

12 ‘‘(6) the Federal Deposit Insurance Corpora13 tion; 

14 ‘‘(7) the Secretary of the Treasury; 

15 ‘‘(8) the United States trustee; and 

16 ‘‘(9) each primary financial regulatory agency, 

17 as defined in section 2(12) of the Dodd-Frank Wall 

18 Street Reform and Consumer Protection Act (12 

19 U.S.C. 5301(12)), with respect to any affiliate that 

20 is proposed to be transferred under this section. 

21 ‘‘(c) The court may not order a transfer under this 

22 section unless the court determines, based upon a prepon23 derance of the evidence, that— 


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1 ‘‘(1) the transfer under this section is necessary 

2 to prevent imminent substantial harm to financial 

3 stability in the United States; 

4 ‘‘(2) the proposed transfer does not provide for 

5 the assumption of any capital structure debt by the 

6 bridge company; 

7 ‘‘(3) the proposed transfer provides for the 

8 transfer of any accounts of depositors of the debtor 

9 that are insured by the Federal Deposit Insurance 

10 Company to the bridge company; and 

11 ‘‘(4) the Board certifies to the court that the 

12 Board has determined that the bridge company pro13 vides adequate assurance of future performance of 

14 any executory contract or unexpired leased assumed 

15 and assigned to the bridge company, and of payment 

16 of any debt assumed by the bridge company, in the 

17 transfer under this section. 

18 ‘‘§ 1407. Automatic stay; assumed debt 

19 ‘‘(a)(1) A petition filed under section 301 or 1403 

20 operates as a stay, applicable to all entities, of the termi21 nation or modification of any debt, contract, lease, or 

22 agreement described in paragraph (2), or of any right or 

23 obligation under any such debt, contract, lease or agree24 ment, solely because of— 


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1 ‘‘(A) a default by the debtor under any such 

2 debt, contract, lease, or agreement; or 

3 ‘‘(B) a provision in such debt, contract, lease, 

4 or agreement or in applicable nonbankruptcy law 

5 that is conditioned on— 

6 ‘‘(i) the insolvency or financial condition of 

7 the debtor at any time before the closing of the 

8 case; 

9 ‘‘(ii) the commencement of a case under 

10 this title concerning the debtor; 

11 ‘‘(iii) the appointment of or taking posses12 sion by a trustee in a case under this title con13 cerning the debtor or by a custodian before the 

14 commencement of the case; or 

15 ‘‘(iv) a credit rating agency rating, or ab16 sence or withdrawal of a credit rating agency 

17 rating— 

18 ‘‘(I) of the debtor at any time after 

19 the commencement of the case; 

20 ‘‘(II) of an affiliate during the 48 

21 hours after the commencement of the case; 

22 or 

23 ‘‘(III) while the special trustee is a di24 rect or indirect beneficial holder of more 


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1 than 50 percent of the equity securities of 

2 the bridge company— 

3 ‘‘(aa) of the bridge company; or 

4 ‘‘(bb) of an affiliate, if all of the 

5 direct or indirect interests in the affil6 iate that are property of the estate 

7 are transferred under section 1406. 

8 ‘‘(2) A debt, contract, lease, or agreement described 

9 in this paragraph is— 

10 ‘‘(A) any debt (other than capital structure 

11 debt), executory contract (other than a qualified fi12 nancial contract), or unexpired lease of the debtor; 

13 ‘‘(B) any agreement under which the debtor 

14 issued or is obligated for debt (other than capital 

15 structure debt); 

16 ‘‘(C) any debt, executory contract (other than a 

17 qualified financial contract), or unexpired lease of an 

18 affiliate; or 

19 ‘‘(D) any agreement under which an affiliate 

20 issued or is obligated for debt. 

21 ‘‘(3) The stay under this subsection terminates— 

22 ‘‘(A) as to the debtor, upon the earliest of— 

23 ‘‘(i) 48 hours after the commencement of 

24 the case; 


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1 ‘‘(ii) assumption of the debt, contract, or 

2 lease under an order authorizing a transfer 

3 under section 1406; or 

4 ‘‘(iii) a determination by the court not to 

5 order a transfer under section 1406; and 

6 ‘‘(B) as to an affiliate, upon the earliest of— 

7 ‘‘(i) entry of an order authorizing a trans8 fer under section 1406 in which the direct or 

9 indirect interests in the affiliate that are prop10 erty of the estate are not transferred under sec11 tion 1406; 

12 ‘‘(ii) a determination by the court not to 

13 order a transfer under section 1406; or 

14 ‘‘(iii) 48 hours after the commencement of 

15 the case, if the court has not ordered a transfer 

16 under section 1406. 

17 ‘‘(4) Sections 362(d), 362(e), 362(f), and 362(g) 

18 apply to a stay under this subsection. 

19 ‘‘(b) A debt, executory contract (other than a quali20 fied financial contract), or unexpired lease of the debtor, 

21 or an agreement under which the debtor has issued or is 

22 obligated for any debt, may be assumed by a bridge com23 pany in a transfer under section 1406 notwithstanding 

24 any provision in an agreement or in applicable nonbank25 ruptcy law that— 


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1 ‘‘(1) prohibits, restricts, or conditions the as2 signment of the debt, contract, lease, or agreement; 

3 or 

4 ‘‘(2) terminates or modifies, or permits a party 

5 other than the debtor to terminate or modify, the 

6 debt, contract, lease, or agreement on account of— 

7 ‘‘(A) the assignment of the debt, contract, 

8 lease, or agreement; or 

9 ‘‘(B) a change in control of any party to 

10 the debt, contract, lease, or agreement. 

11 ‘‘(c)(1) A debt, contract, lease, or agreement of the 

12 kind described in subsection (a)(2)(A) or (a)(2)(B) may 

13 not be terminated or modified, and any right or obligation 

14 under such debt, contract, lease, or agreement may not 

15 be terminated or modified, as to the bridge company solely 

16 because of a provision in the debt, contract, lease, or 

17 agreement or in applicable nonbankruptcy law— 

18 ‘‘(A) of the kind described in subsection 

19 (a)(1)(B) as applied to the debtor; 

20 ‘‘(B) that prohibits, restricts, or conditions the 

21 assignment of the debt, contract, lease, or agree22 ment; or 

23 ‘‘(C) that terminates or modifies, or permits a 

24 party other than the debtor to terminate or modify, 


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1 the debt, contract, lease or agreement, on account 

2 of— 

3 ‘‘(i) the assignment of the debt, contract, 

4 lease, or agreement; or 

5 ‘‘(ii) a change in control of any party to 

6 the debt, contract, lease, or agreement. 

7 ‘‘(2) If there has been a default by the debtor of a 

8 provision other than the kind described in paragraph (1) 

9 in a debt, contract, lease or agreement of the kind de10 scribed in subsection (a)(2)(A) or (a)(2)(B), the bridge 

11 company may assume such debt, contract, lease, or agree12 ment only if the bridge company— 

13 ‘‘(A) cures, or provides adequate assurance to 

14 the court in connection with a transfer under section 

15 1406 that the bridge company will promptly cure, 

16 the default; 

17 ‘‘(B) compensates, or provides adequate assur18 ance to the court in connection with a transfer 

19 under section 1406 that the bridge company will 

20 promptly compensate, a party other than the debtor 

21 to the debt, contract, lease, or agreement, for any 

22 actual pecuniary loss to the party resulting from the 

23 default; and 

24 ‘‘(C) provides adequate assurance to the court 

25 in connection with a transfer under section 1406 of 


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1 future performance under the debt, contract, lease, 

2 or agreement. 

3 ‘‘§ 1408. Treatment of qualified financial contracts 

4 and affiliate contracts 

5 ‘‘(a) Notwithstanding sections 362(b)(6), 362(b)(7), 

6 362(b)(17), 362(b)(27), 555, 556, 559, 560, and 561, a 

7 petition filed under section 301 or 1403 operates as a stay, 

8 during the period specified in section 1407(a)(3)(A), ap9 plicable to all entities, of the exercise of a contractual 

10 right— 

11 ‘‘(1) to cause the liquidation or termination of 

12 a qualified financial contract of the debtor or an af13 filiate; or 

14 ‘‘(2) to offset or net out any termination value, 

15 payment amount, or other transfer obligation arising 

16 under or in connection with a qualified financial con17 tract of the debtor or an affiliate; or 

18 ‘‘(3) under any security agreement or arrange19 ment or other credit enhancement forming a part of 

20 or related to a qualified financial contract of the 

21 debtor or an affiliate. 

22 ‘‘(b)(1) During the period specified in section 

23 1407(a)(3)(A), the trustee or the affiliate shall perform 

24 all payment and delivery obligations under a qualified fi25 nancial contract of the debtor or the affiliate, respectively, 


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1 that become due after the commencement of the case. The 

2 stay provided under subsection (a) terminates as to a 

3 qualified financial contract of the debtor or an affiliate 

4 immediately upon the failure of the trustee or the affiliate, 

5 respectively, to perform any such obligation during such 

6 period. 

7 ‘‘(2) A counterparty to any qualified financial con8 tract of the debtor that is assumed and assigned in a 

9 transfer under section 1406 may perform any 

10 unperformed payment or delivery obligation under the 

11 qualified financial contract promptly after the assumption 

12 and assignment with the same effect as if the counterparty 

13 had timely performed such obligations. 

14 ‘‘(c) A qualified financial contract between an entity 

15 and the debtor may not be assigned to or assumed by the 

16 bridge company in a transfer under section 1406 unless— 

17 ‘‘(1) all qualified financial contracts between 

18 the entity and the debtor are assigned to and as19 sumed by the bridge company in the transfer under 

20 section 1406; 

21 ‘‘(2) all claims of the entity against the debtor 

22 under any qualified financial contract between the 

23 entity and the debtor (other than any claim that, 

24 under the terms of the qualified financial contract, 

25 is subordinated to the claims of general unsecured 


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1 creditors) are assigned to and assumed by the bridge 

2 company; 

3 ‘‘(3) all claims of the debtor against the entity 

4 under any qualified financial contract between the 

5 entity and the debtor are assigned to and assumed 

6 by the bridge company; and 

7 ‘‘(4) all property securing or any other credit 

8 enhancement furnished by the debtor for any quali9 fied financial contract described in paragraph (1) or 

10 any claim described in paragraph (2) or (3) under 

11 any qualified financial contract between the entity 

12 and the debtor is assigned to and assumed by the 

13 bridge company. 

14 ‘‘(d) Section 365(b)(1) does not apply to a default 

15 under a qualified financial contract of the debtor that is 

16 assumed and assigned in a transfer under section 1406 

17 if the default— 

18 ‘‘(1) is a breach of a provision of the kind spec19 ified in section 1407(a)(1)(B)(iv); and 

20 ‘‘(2) in the case of a breach of a provision of 

21 the kind specified in section 1407(a)(1)(B)(iv)(III), 

22 occurs while the bridge company is a direct or indi23 rect beneficial holder of more than 50 percent of the 

24 equity securities of the affiliate. 


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1 ‘‘(e) Notwithstanding any provision in a qualified fi2 nancial contract or in applicable nonbankruptcy law, a 

3 qualified financial contract of the debtor that is assumed 

4 or assigned in a transfer under section 1406 may not be 

5 terminated or modified, and any right or obligation under 

6 the qualified financial contract may not be terminated or 

7 modified, for a breach of a provision of the kind specified 

8 in section 1407(b) at any time after the entry of an order 

9 under section 1406 until such time as the special trustee 

10 is no longer the direct or indirect beneficial holder of more 

11 than 50 percent of the equity securities of the bridge com12 pany. 

13 ‘‘(f) Notwithstanding any provision in any agreement 

14 or in applicable nonbankruptcy law, an agreement of an 

15 affiliate (including an executory contract, unexpired lease, 

16 or agreement under which the affiliate issued or is obli17 gated for debt), and any right or obligation under such 

18 agreement, may not be terminated or modified at any time 

19 after the commencement of the case solely because of a 

20 condition described in section 1407(b) if— 

21 ‘‘(1) all direct or indirect interests in the affil22 iate that are property of the estate are transferred 

23 under section 1406 to the bridge company within the 

24 period specified in subsection (a); 

25 ‘‘(2) the bridge company assumes— 


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1 ‘‘(A) any guarantee or other credit en2 hancement issued by the debtor relating to the 

3 agreement of the affiliate; and 

4 ‘‘(B) any right of setoff, netting arrange5 ment, or debt of the debtor that directly arises 

6 out of or directly relates to the guarantee or 

7 credit enhancement; and 

8 ‘‘(3) any property of the estate that directly 

9 serves as collateral for the guarantee or credit en10 hancement is transferred to the bridge company. 

11 ‘‘§ 1409. Licenses, permits, and registrations 

12 ‘‘(a) Notwithstanding any otherwise applicable non13 bankruptcy law, if a request is made under section 1406 

14 for a transfer of property of the estate, any Federal, State, 

15 or local license, permit, or registration that the debtor or 

16 an affiliate had immediately before the commencement of 

17 the case and that is proposed to be transferred under sec18 tion 1406 may not be terminated or modified at any time 

19 after the request solely on account of— 

20 ‘‘(1) the insolvency or financial condition of the 

21 debtor at any time before the closing of the case; 

22 ‘‘(2) the commencement of a case under this 

23 title concerning the debtor; 

24 ‘‘(3) the appointment of or taking possession by 

25 a trustee in a case under this title concerning the 


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1 debtor or by a custodian before the commencement 

2 of the case; or 

3 ‘‘(4) a transfer under section 1406. 

4 ‘‘(b) Notwithstanding any otherwise applicable non5 bankruptcy law, any Federal, State, or local license, per6 mit, or registration that the debtor had immediately before 

7 the commencement of the case that is included in a trans8 fer under section 1406 shall vest in the bridge company. 

9 ‘‘§ 1410. Exemption from securities laws 

10 ‘‘For purposes of section 1145, a security of the 

11 bridge company shall be deemed to be a security of a suc12 cessor to the debtor under a plan if the court approves 

13 the disclosure statement for the plan as providing ade14 quate information (as defined in section 1125(a)) about 

15 the bridge company and the security. 

16 ‘‘§ 1411. Inapplicability of certain avoiding powers 

17 ‘‘Except with respect to a capital structure debt, a 

18 transfer made or an obligation incurred by the debtor, in19 cluding any obligation released by the debtor or the estate, 

20 to or for the benefit of an affiliate in a transfer under 

21 section 1406, is not avoidable under section 544, 547, 

22 548(a)(1)(B), or 549, or under any similar nonbankruptcy 

23 law.’’. 

24 (b) TECHNICAL AND CONFORMING AMENDMENT.— 

25 The table of chapters for title 11, United States Code, 


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1 is amended by inserting after the item relating to chapter 

2 13 the following: 

‘‘14. Liquidation, reorganization, or recapitalization of a covered financial corporation ............................................................. 1401’’. 

3 SEC. 5. AMENDMENTS TO TITLE 28, UNITED STATES CODE. 

4 (a) AMENDMENT TO CHAPTER 13.—Chapter 13 of 

5 title 28, United States Code, is amended by adding at the 

6 end the following: 

7 ‘‘§ 298. Judge for a case under chapter 14 of title 11 

8 ‘‘(a) Notwithstanding section 295, the Chief Justice 

9 of the United States shall designate not less than 1 dis10 trict judge from each circuit to be available to hear an 

11 appeal under section 158(a) in a case under title 11 con12 cerning a covered financial corporation or under section 

13 1403(c) of title 11. 

14 ‘‘(b)(1) Notwithstanding section 295, the Chief Jus15 tice of the United States shall designate a panel of not 

16 less than 10 bankruptcy judges, who are experts in cases 

17 under title 11 in which a financial institution is a debtor, 

18 to be available to hear a case under chapter 14 of title 

19 11. 

20 ‘‘(2) Notwithstanding section 295, a case under chap21 ter 14 of title 11 shall be heard under section 157 by a 

22 bankruptcy judge designated under paragraph (1), who 

23 shall be assigned to hear such case by the chief judge of 


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1 the court of appeals for the circuit embracing the district 

2 in which the case is pending. 

3 ‘‘(3) If the bankruptcy judge designated and assigned 

4 to hear a case under paragraphs (1) and (2) is not as5 signed to the district in which the case is pending, the 

6 bankruptcy judge shall be temporarily assigned to the dis7 trict. 

8 ‘‘(c)(1) Notwithstanding section 295, an appeal 

9 under section 158(a) in a case under title 11 concerning 

10 a covered financial corporation or under section 1403(c) 

11 of title 11 shall be heard by a district judge who— 

12 ‘‘(A) is the district judge designated under sub13 section (a) from the circuit in which the case is 

14 pending; 

15 ‘‘(B) if more than 1 district judge has been des16 ignated under subsection (a) from the circuit in 

17 which the case is pending, is 1 such district judge 

18 who is designated by the chief judge of that circuit 

19 to hear the case; or 

20 ‘‘(C) if none of the district judges designated 

21 under subsection (a) for the circuit in which the case 

22 is pending are immediately available, is designated 

23 under subsection (a) from another circuit and has 

24 been designated by the Chief Justice of the United 

25 States to hear the case. 


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1 ‘‘(2) If the district judge specified in paragraph (1) 

2 is not assigned to the district in which the case is pending, 

3 the district judge shall be temporarily assigned to the dis4 trict. 

5 ‘‘(d) A case under chapter 14 of title 11, and all pro6 ceedings in the case, shall take place in the district in 

7 which the case is pending. 

8 ‘‘(e) In this section, the terms ‘covered financial cor9 poration’ and ‘financial institution’ have the meaning 

10 given such terms in section 101 of title 11.’’. 

11 (b) AMENDMENT TO SECTION 1334.—Section 1334 

12 of title 28, United States Code, is amended by adding at 

13 the end the following: 

14 ‘‘(f) This section does not grant jurisdiction to the 

15 district courts after a transfer pursuant to an order under 

16 section 1406 of title 11— 

17 ‘‘(1) of any proceeding related to a special 

18 trustee appointed, or to a bridge company formed, 

19 under section 1405 of title 11; or 

20 ‘‘(2) over the property held in trust by the spe21 cial trustee, the bridge company, or the property of 

22 the bridge company.’’. 

23 (c) TECHNICAL AND CONFORMING AMENDMENT.— 

24 The table of sections for chapter 13 of title 28, United 


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1 States Code, is amended by adding at the end the fol2 lowing: 

‘‘298. Judge for a case under chapter 14 of title 11.’’. 

3 SEC. 6. LIMITATION ON ADVANCES FROM A FEDERAL RE4 SERVE BANK. 

5 Section 10B(b) of the Federal Reserve Act (12 

6 U.S.C. 347b(b)) is amended— 

7 (1) by redesignating paragraph (5) as para8 graph (6); 

9 (2) by inserting after paragraph (4) the fol10 lowing: 

11 ‘‘(5) LIMITATION ON ADVANCES TO COVERED

12 FINANCIAL CORPORATIONS AND BRIDGE COMPA13 NIES.—Notwithstanding paragraph (2), a Federal 

14 Reserve bank may not make advances to any covered 

15 financial corporation that is a debtor in a pending 

16 case under chapter 14 of title 11, United States 

17 Code, or to a bridge company, for the purpose of 

18 providing debtor-in-possession financing pursuant to 

19 section 364 of such title.’’; and 

20 (3) in paragraph (6), as redesignated— 

21 (A) by redesignating subparagraphs (B) 

22 through (E) as subparagraphs (D) through (G), 

23 respectively; and 

24 (B) by inserting after subparagraph (A) 

25 the following: 


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1 ‘‘(B) BRIDGE COMPANY.—The term 

2 ‘bridge company’ has the same meaning as in 

3 section 1402(2) of title 11, United States Code. 

4 ‘‘(C) COVERED FINANCIAL CORPORA5 TION.—The term ‘covered financial corporation’ 

6 has the same meaning as in section 101(9A) of 

7 title 11, United States Code.’’. 

Æ 


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