The House of Representatives voted Wednesday to add a new section to the bankruptcy code just for banks, a measure meant to allow banks to fail without needing taxpayer bailouts or setting off a crisis.
The lower chamber passed the Financial Institution Bankruptcy Act of 2017 on a voice vote, a week after the bill cleared the Judiciary Committee also on a voice vote.
Speaking on the House floor Wednesday, committee chairman Bob Goodlatte of Virginia said that the legislation “will better equip our bankruptcy laws to resolve failing firms, while also encouraging greater private counter-party diligence in order to reduce the likelihood of another financial crisis.”
The bill would set out a specific set of rules to help authorities sort out which creditors are owed in the event of a bank bankruptcy, in an effort to reduce the panic and uncertainty that can accompany these events.
The House has passed the legislation in previous Congresses, but the Senate has not acted on it.
While Wednesday’s measure received Democratic support, House Republicans are also expected to introduce legislation that would repeal the new authority of government regulators to take over failing banks and shutter them, and force banks to rely entirely on the bankruptcy process instead. That approach would meet Democratic opposition.
The bill provides for reorganizing a failed bank over a weekend, and for sorting out the claims made on the bank involving complicated financial instruments.
