The Federal Reserve Banks of Richmond and Philadelphia held a workshop on financial firm bankruptcy at the Charlotte Branch of the Richmond Fed on July 25-26, 2011. Researchers from academia and the Fed discussed bankruptcy policy topics related to the failure of large financial institutions.
On the first day, the workshop focused on the preferential treatment of derivatives and repos during the bankruptcy process. Some believe this policy helps to mitigate systemic risk by maintaining the ability of sellers of derivatives to perform on their contracts. Others think it contributes to systemic risk by encouraging excessive risk-taking and runs on collateral. The second day of the workshop focused on proposals to reform the bankruptcy code with respect to financial-firm failures as a supplement to the Orderly Liquidation Authority created by the Dodd-Frank Act.
Policymakers, practitioners, and scholars
Monday, July 25 — Bankruptcy and Derivatives
12:00 p.m. – 1:00 p.m.
1:00 p.m. – 1:15 p.m.
Welcome: Jeffrey M. Lacker, President, Federal Reserve Bank of Richmond
4:00 p.m. – 5:00 p.m.
Douglas W. Diamond, University of Chicago, "Treatment of Derivatives in Resolution: Perspectives from Debt Theory"
Tuesday, July 26 — Alternative Failure Resolution Approaches
8 a.m. – 9:00 a.m.
12:15 p.m. – 12:30 p.m.
Wrap-up: Charles I. Plosser, President, Federal Reserve Bank of Philadelphia