I highlighted this provision in the administration's financial reform proposal the other day, but I still can't get over the mandatory bankruptcy petition for Tier 1 financial holding companies within 90 days of being designated "critically undercapitalized." No exceptions. That has to be a mistake, right? I mean, I understand that they were trying to model the rules for Tier 1 FHCs after the "prompt corrective action" requirements that currently govern FDIC-insured banks, but not even the prompt corrective action requirements are that harsh. Why would we want to require a relatively sudden bankruptcy for a financial company whose failure we've already decided would threaten the stability of the financial markets? It doesn't make any sense. This has to be a mistake. Someone get Geithner on the phone.
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