Comment Letter in Response to the FDICs Interim Final Rule Implementing Certain Provisions of the Orderly Liquidation Authority (OLA),

March 28, 2011

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Topics: Federal Deposit Insurance Corporation FDIC, Liquidation Authority provisions, orderly liquid authority, OLA, creditor losses, shareholder losses, liquidation process, systemically significant firm, non-statutory considerations, Bankruptcy Code, Federal Rules of Bankruptcy Procedure, financial market meltdown, covered financial institution, insolvency laws, insolvency proceeding, investor, systemic risk, transparency, estate, creditor participation, creditor involvement, market expertise, Disclosure, claim disallowance, judicial review, distress, volatility, moral hazard, market discipline, receivership, short-term creditors, debt instrument, allocation of capital, short-term financing, longer-term financing, bond holders, short-term lenders, providers of lines of credit, preferred creditors, equality of distribution, critical vendors, doctrine of necessity, Union Bank v. Wolas, chapter 7 liquidation, favored creditors, unsecured creditors, Board of Directors of FDIC, ratable payments, liquidation value, valuation of collateral, underlying collateral, unsecured claim, fair market value, US government securities, valuation rules, true market valuation, unsecured deficiency claim, quotes, market data, third-party market participants, valuation date, publicly traded securities, secured creditor, receivership estate, market fluctuations, swaps, repurchase agreements, securities contracts, bridge financial company, default, contingent claims, unduly delay, liquidation framework,
From: MFA, Richard Baker


Robert Feldman, FDIC

MFA filed a comment letter in response to the FDICs interim final rule implementing certain provisions of the orderly liquidation authority (OLA), including additional payments to similarly situated creditors, valuation of collateral, and estimation of contingent claims. In our letter, which supplemented two previous letters to the FDIC on these provisions of the OLA, we: (i) continued to express our concern with the distinction between short and long-term debt holders with respect to the possibility of additional payments being made to creditors; (ii) expressed support for the FDICs decision to amend its valuation rule to require fair valuation of all securities; (iii) encouraged the FDIC to publish for comment the policies and procedures it will use to determine fair value; and (iv) expressed our view that the FDIC should not designate a specific time at which it will estimate contingent claims. We further urged the FDIC to harmonize, to the greatest extent possible, rules under the OLA with the Bankruptcy Code and related rules.