WASHINGTON – Legislation co-authored by Congressman Spencer Bachus (AL-6) to address gaps in the bankruptcy code that became evident during the financial crisis of 2008 has been approved by the House on a bipartisan basis.

Bachus was Ranking Member of the House Financial Services Committee during the financial crisis.  At that time, it was found that the standard bankruptcy process was not equipped to deal with the challenges posed by large, distressed financial institutions.  In its absence, the House passed special legislation (the Emergency Economic Stabilization Act) to stabilize the banking system.

The bill approved by the House, the Financial Institution Bankruptcy Act of 2014, contains reforms to the bankruptcy code to allow the courts to better process the complex cases associated with failing financial institutions.

The following release from the House Judiciary Committee provides details on the legislation.

From the House Judiciary Committee:

December 1, 2014 - The House of Representatives passed H.R. 5421, the Financial Institution Bankruptcy Act of 2014 (FIBA), by a voice vote. FIBA is the product of the Judiciary Committee’s multi-year examination of the ability of the bankruptcy laws to resolve a failing financial institution.

FIBA incorporates the recommendations of hearing witnesses, regulators and other experts in addition to the record of three Committee hearings on the Bankruptcy Code. Specifically, the bill adds a new subchapter to Chapter 11 of the Bankruptcy Code that improves the bankruptcy process for financial firms of varying sizes, including large, multinational firms whose resolution could have far-reaching implications for domestic and global economies.

House Judiciary Committee Chairman Bob Goodlatte (R-Va.), Ranking Member John Conyers (D-Mich.) and Regulatory Reform Subcommittee Chairman Spencer Bachus (R-Ala.) praised the House passage of FIBA:

“As leaders of the Judiciary Committee with oversight of our nation’s bankruptcy laws, we have worked across the aisle to answer the question of how to improve the existing bankruptcy process for the resolution of failing financial institutions. Our answer is FIBA.

“FIBA removes potential obstacles to an efficient bankruptcy of a financial institution. This legislation enhances the Bankruptcy Code and its ability to resolve financial firms for the benefit of stability in the U.S. and global economies and does so with minimal financial burdens or cost. We applaud the House’s passage of FIBA as an important first step towards enactment into law.”