A Comparison of U.S. Corporate and Bank Insolvency Resolution

13 Pages Posted: 9 Jun 2006  

Robert R. Bliss

Wake Forest University - Schools of Business

George G. Kaufman

Loyola University Chicago

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.

Keywords: Banks; Bankruptcy, Liquidation, Regulated Industries and Administrative Law

Suggested Citation

Bliss, Robert R. and Kaufman, George G., A Comparison of U.S. Corporate and Bank Insolvency Resolution. Economic Perspectives, 2006; FRB of Chicago Working Paper. Available at SSRN: https://ssrn.com/abstract=906577

Robert R. Bliss (Contact Author)

Wake Forest University - Schools of Business ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States
336-758-5957 (Phone)
336-758-6133 (Fax)

George G. Kaufman

Loyola University Chicago ( email )

820 North Michigan Avenue
School of Business
Chicago, IL 60611
United States
312-915-7075 (Phone)
312-915-8508 (Fax)

HOME PAGE: http://www.luc.edu/faculty/gkaufma/

Paper statistics

Downloads
470
Rank
47,805
Abstract Views
2,731