Treasury Proposes Legislation to Resolve Systemically Significant Financial Companies

On March 26, 2009, the U.S. Department of the Treasury (the “Treasury”) released draft legislation entitled the Resolution Authority for Systemically Significant Financial Companies Act of 2009 (the“Act”), a copy of which is attached. This legislation represents the first component of the Treasury’s framework for financial markets regulatory reform, which includes (i) addressing systemic risk, (ii) improving consumer and investor protection, (iii) eliminating gaps in the regulatory structure and (iv) fostering international coordination. We expect this draft legislation will generate a great deal of controversy.

Significant aspects of the Act are described in the attached Alert Memo, including (i) the financial companies covered by the Act, (ii) the grounds for exercising resolution powers under the Act, (iii) the resolution powers available under the act, (iv) the Act’s special provisions concerning qualified financial contracts (certain securities, commodity and forward contracts and repurchase and swap agreements) and (v) the government’s ability to recover the costs of resolution.

If you have any questions, please feel free to contact any of your regular contacts at the firm or any of the partners and counsel listed under Banking and Financial Institutions on this website.