[Congressional Record Volume 161, Number 115 (Wednesday, July 22, 2015)]
[Senate]
[Pages S5456-S5468]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
______
By Mr. REID (for himself and Mr. Heller):
S. 1825. A bill to require the Secretary of Energy to obtain the
consent of affected State and local governments before making an
expenditure from the Nuclear Waste Fund for a nuclear waste repository;
to the Committee on Energy and Natural Resources.
Mr. REID. Mr. President, I ask unanimous consent that the text of the
bill be printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 1825
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Nuclear Waste Informed
Consent Act''.
SEC. 2. DEFINITIONS.
In this Act, the terms ``affected Indian tribe'',
``affected unit of local government'', ``Commission'',
``high-level radioactive waste'', ``repository'', ``spent
nuclear fuel'', and ``unit of general local government'' have
the meanings given the terms in section 2 of the Nuclear
Waste Policy Act of 1982 (42 U.S.C. 10101).
SEC. 3. CONSENT BASED APPROVAL.
(a) In General.--The Secretary may not make an expenditure
from the Nuclear Waste Fund for the costs of the activities
described in paragraphs (4) and (5) of section 302(d) of the
Nuclear Waste Policy Act of 1982 (42 U.S.C. 10222(d)) unless
the Secretary has entered into an agreement to host a
repository with--
(1) the Governor of the State in which the repository is
proposed to be located;
(2) each affected unit of local government;
(3) any unit of general local government contiguous to the
affected unit of local government if spent nuclear fuel or
high-level radioactive waste will be transported through that
unit of general local government for disposal at the
repository; and
(4) each affected Indian tribe.
(b) Conditions on Agreement.--Any agreement to host a
repository under this Act--
(1) shall be in writing and signed by all parties;
(2) shall be binding on the parties; and
(3) shall not be amended or revoked except by mutual
agreement of the parties.
______
By Ms. COLLINS (for herself, Mr. Warner, Ms. Mikulski, Mr. Coats,
Ms. Ayotte, and Mrs. McCaskill):
S. 1828. A bill to strengthen the ability of the Secretary of
Homeland Security to detect and prevent intrusions against, and to use
countermeasures to protect, government agency information systems and
for other purposes; to the Committee on Homeland Security and
Governmental Affairs.
Ms. COLLINS. Mr. President, I rise today to introduce the Federal
Information Security Management Act of 2015. I am very pleased that
Senator Warner, Senator Mikulski, Senator Coats, Senator Ayotte, and
Senator McCaskill are joining me in this bipartisan effort to
strengthen cyber security in Federal agencies. I very much appreciate
their input into this bill and their support.
The cyber attack that stole sensitive personal data from millions of
current, former, and retired Federal employees from the poorly secured
databases at the Office of Personnel Management
[[Page S5457]]
underscores the extraordinary vulnerability of our Federal computer
networks, but for the more than 21 million Americans affected and
indeed for our country, the threat from this theft continues. Whether
it is the risk to the individual of identity theft or the impact on our
Nation of the compromise of the identity of those dealing with
classified information or the potential for espionage or blackmail, the
threat remains extremely serious.
Worst of all, better security of computer networks at OPM might well
have prevented this terrible breach. The negligence of OPM officials
who ignored repeated warnings over years from the inspector general
that its networks were vulnerable is inexcusable. As the FBI Director
testified before the Intelligence Committee during an open session
earlier this month, this breach is a huge deal and represents a
treasure trove of information for potential adversaries.
But this cyber attack also points to a broader problem, and that is
the glaring gap in the process for protecting sensitive information in
Federal civilian agencies. Thus, we join together today to introduce
this bipartisan bill.
Our bill would strengthen the security of the networks of Federal
civilian agencies by taking five important steps:
First, our bill would allow the Secretary of Homeland Security to
operate intrusion detection and prevention capabilities on all Federal
agencies on the dot-gov domain without waiting for a request from every
single agency.
Today, if an agency is uncooperative with DHS or simply does not want
to make cyber security a priority, there is little that can be done to
strengthen that agency's vulnerable network. I have visited the center
at DHS that monitors some of the civilian networks. You could see the
attempted intrusions in real time. Yet, I was told by some of the
officials there that when they call the chief information official of
that agency, sometimes the answer is very lackadaisical, almost
indifferent. That cannot be allowed to continue.
Second, our bill directs the Secretary of Homeland Security to
conduct risk assessments of any network within the dot-gov domain. This
provision would ensure that no Federal agency can be unaware if it is
operating an insufficiently secured network and thus jeopardizing
sensitive data.
Third, our bill would allow the Secretary of Homeland Security to
operate defensive countermeasures on these networks once a cyber threat
has been detected. Currently, DHS can deploy technical assistance to
agencies to diagnose and mitigate cyber threats only at that agency's
discretion, and sometimes there are legal impediments for doing so.
Fourth, our bill would strengthen and streamline the authorities that
Congress gave to DHS last year to issue binding operational directives
to Federal agencies, especially to respond to substantial cyber
security threats or in an emergency where an intrusion is underway.
Finally, while DHS oversees the protection of Federal civilian
networks, the Office of Management and Budget has the ultimate
responsibility to enforce governmentwide cyber security standards for
civilian agencies. Our bill would require OMB to report to Congress
annually on the extent to which OMB has exercised its existing
authority to enforce governmentwide cyber security standards.
Congress has already given the OMB the authority, for example, to
recommend increases or decreases in an agency's funding or to exercise
administrative control over information resources if such actions could
increase the degree of compliance with cyber security standards. But I
regret to say that the evidence that OMB has actually exercised this
authority is pretty slim.
The primary problem our bill would solve is that DHS has the mandate
to protect the civilian Federal networks, but it has only limited
authority to do so. Now, as the Presiding Officer is well aware, this
approach stands in stark contrast to how the National Security Agency
defends the dot-mil domain.
By the way, our legislation does not affect the dot-mil domain--which
covers the Department of Defense and our intelligence agencies--in any
way. The Director of the NSA has the responsibility to protect the dot-
mil domain, but he also has the authority from the Secretary of Defense
to monitor all DOD networks and to deploy countermeasures when
necessary. If the Director deems that an agency's network is insecure,
he can shut it down. Contrast that to the inspector general at OPM, who
last fall issued a report saying that OPM ought to shut down parts of
its network because it was so insecure, and nothing happened. OPM
didn't take any action and DHS lacked the authority to do so. That
stands in sharp contrast to how we protect our defense and intelligence
agencies' networks. As a result, our military and intelligence networks
are better protected from foreign adversaries than our civilian
agencies' networks.
Although the Secretary of Homeland Security is tasked with a similar
responsibility to protect Federal civilian networks, he has far less
authority to accomplish that task. Yet--think about it--Federal
civilian agencies such as OPM, the IRS, the Social Security
Administration, Medicare, and the Patent Office are the repositories of
vast quantities of sensitive, personal, and economic data belonging to
the American people. We have to do a better job of protecting that data
as well.
When the Intelligence Committee on which I served asked the current
Director of NSA how we might improve the protection of the dot-gov
domain, he emphasized the importance of providing the authority
commensurate with the responsibility for protecting civilian agency
networks.
The Secretary of Homeland Security, Jeh Johnson, similarly said that
obtaining clear, congressional authorization for DHS to deploy
protective capabilities to secure civilian agencies' networks is one of
his priorities.
I heard the same message from his predecessor, Secretary Janet
Napolitano, when I was the ranking member of the homeland security
committee in 2012.
By the way, that year former Senator Joe Lieberman and I urged our
colleagues to pass the Cybersecurity Act of 2012, which we drafted and
which included, among other provisions, major reforms to improve the
protection of Federal networks. We will never know if the OPM breach
that compromised the security clearance background information of more
than 21 million people could have been prevented if the Senate had
passed our bill at that time. Of course, no bill, no law can protect
against every cyber breach, but I believe we would have been far better
positioned had we acted then.
What we do know is that once a malware signature is identified, it
was DHS's intrusion detection system--known as EINSTEIN--and other DHS-
recommended tools that played key roles in identifying the massive
compromise of the OPM data. Without these tools, OPM might still be
blissfully unaware that it had been subjected to a major hack.
The government's response to the breach demonstrates the urgent need
for our legislation. The five agency networks that were monitored by
EINSTEIN 3 were protected and capable of blocking the malware the
moment the dangerous signatures used in the OPM breach were loaded into
their systems. For every other civilian agency, however, that was not
the case. DHS had to call the chief information officer responsible for
every one of those networks that were not covered yet by the EINSTEIN 3
system. Then the bad indicators had to be passed on to each CIO, and
each CIO had to search their agency networks for the harmful malware.
Cyber threats move at the speed of light. No organization that takes
cyber security seriously would rely upon a game of telephone tag to
guard the security of its information.
I also note that at the time the OPM breach actually occurred, the
latest version of EINSTEIN had been deployed on less than 25 percent of
the dot-gov network. So even if the government had detected the malware
immediately, the government's ability to protect all of the networks
would have taken that much longer because DHS's best intrusion system
was not deployed widely enough. And, inexplicably, to this day, it is
still not installed at OPM despite the information it stores as the
chief employment office for millions of Federal employees and retirees.
If we fail to give these much needed authorities to DHS, the
unacceptable
[[Page S5458]]
status quo will prevail. Under the status quo, each agency--however
competently or incompetently--monitors its own networks and only asks
DHS for assistance if it sees fit to do so. Let me describe just how
poorly that approach has worked so far.
We know that information security incidents in the Federal Government
have increased more than twelvefold--from 5,500 in fiscal year 2006 to
more than 67,000 in fiscal year 2014 according to the Government
Accountability Office. That undoubtedly understates the real number
since these are just the incidents of which we are aware. Nineteen of
twenty-four major agencies have declared cyber security as a
significant deficiency or material weakness for financial reporting
purposes. At the same time, Federal agencies have failed to implement
hundreds of recommendations from the GAO and inspectors general that
could enhance the security of their networks.
I could go on and on, citing the breach at IRS, at the Postal
Service, at FAA, at NOAA, not to mention the OPM breach. It is
unacceptable that we are putting important data belonging to the
American people as well as our economic edge at risk. We simply have to
take action now.
It is incredible that OPM implausibly asserted earlier this month
that ``there is no information at this time to suggest any misuse or
further dissemination of the information that was stolen from OPM's
systems.'' That incredible statement, which implied that the
perpetrators of this lengthy and extensive attack have no intention of
ever using the stolen data, suggests that OPM still has yet to
recognize the gravity of this cyber attack.
But Congress also has the responsibility to make the job for those
securing our Federal civilian networks easier to do in light of the
extraordinary threat that foreign adversaries, international criminal
gangs, and other hackers pose to government systems and the privacy and
safety of our citizens. This bill is the first of many steps to
strengthen our Nation's cyber security, and I urge my colleagues to
support this bipartisan measure.
Mr. WARNER. Mr. President, I rise today to speak on the Federal
Information Security Management Reform Act, FISMA Reform, of 2015,
which I introduced today with Senator Collins, Senator Mikulski,
Senator Coats, Senator Ayotte, and Senator McCaskill. This legislation
will give the Department of Homeland Security the power to make sure
that civilian government agencies--like OPM--have adequate cyber
defenses against these kinds of attacks.
Cyberattacks present one of the most critical national and economic
threats that this Nation faces. As the FBI Director recently stated,
there are two types of companies in the U.S.--those that have been
hacked by China, and those that do not yet know they have been hacked.
Estimates by the Center for Strategic and International Studies
indicate that cyberattacks and cybercrime account for between $24 and
as much as $120 billion in economic and intellectual property loss per
year in the U.S. That is the equivalent of .2 to .8 percent of our GDP.
The same CSIS study suggests that $100 billion in losses due to
cyberattacks is the equivalent of over half a million lost U.S. jobs.
As we have seen with the OPM cyberattack, more than 22 million
Federal employees, retirees and applicants had their personal data
stolen, including--most troublingly--information on their security
clearance background investigations. The scope of this breach was
unprecedented. As the FBI Director told the Intelligence Committee
recently, this is a ``huge deal'' and represents a treasure trove of
information for potential adversaries.
But this is a serious problem that isn't limited to government, as we
have already seen with recent breaches involving Anthem, CareFirst,
Target, Neiman Marcus, Home Depot, and banks like J.P. Morgan, just to
name a few. Both the private and public sector need to be better
prepared for an increasing number of these cyberattacks.
To figure out how to protect consumers' financial data, last year I
held the first hearing in Congress into data breaches in the aftermath
of the Target breach.
One takeaway was how much more serious private sector and government
entities need to be in investing in infrastructure and talent to secure
their systems from cyberattack and breach. While there is always a risk
of breaches, we can significantly mitigate those risks by increasing
our ability to detect and respond to attacks.
I also believe we must get serious about passing cybersecurity
legislation. This is also why I supported the Cyber Information Sharing
Act (CISA) that passed in the Senate Intelligence Committee 14-1 in
March.
A couple years ago, Senators Lieberman and Collins had a
comprehensive cybersecurity bill which was unable to pass in the
Senate. Unfortunately, when the bill did not pass, so did many of the
good-government provisions such as strengthening the ability of the
government to protect the ``Dot-gov'' infrastructure. While some of the
language in the Lieberman-Collins bill regarding the DHS's role in
cybersecurity did make it into law in December 2014, these changes did
not go far enough.
That is why today I have introduced with Senator Collins, Senator
Mikulski, Senator Coats, Senator Ayotte and Senator McCaskill the
Federal Information Security Management Reform Act, FISMRA, of 2015.
This legislation would give the DHS strengthened authorities to enforce
standards, employ cyber threat detection technology and defensive
countermeasures, and to conduct threat and vulnerability analyses
across all civilian U.S. Government agencies. Our bill would affect
federal agencies only, except defense and intelligence agencies, not
the private sector.
The basic problem with protecting U.S. Government information systems
is that while DHS has the responsibility to protect the ``Dot-gov''
domain, right now it does not have the ``teeth'' to actually enforce
security standards or fix vulnerabilities. It is likely that if the DHS
had the additional authorities we are proposing this could have helped
to discover the OPM breach sooner. In fact, OPM only discovered the
breach after implementing a cybersecurity tool that was recommended by
the DHS.
Our bill would give the DHS secretary the authority to direct--not
request--that agencies undertake needed corrective actions to protect
their cyber and information systems. Now, some government agencies
systems may already be pretty good--so the DHS may not need to issue
them directives. But I also know that we are not where we want to be.
While the breach at OPM was and continues to be devastating to those
federal employees who are affected, we need to remember that
cybersecurity is not just an issue at OPM. A recent article in the New
York Times quoted the President's cyber advisor, Michael Daniels, as
saying ``it's safe to say that federal agencies are not where we want
them to be across the board,'' that the bureaucracy needed a ``mind-set
shift,'' that would put cybersecurity at the top of their list of
priorities, and that ``we clearly need to be moving faster.''
Likewise, a recent audit of the Federal Aviation Administration's
network in January cited ``significant security control weaknesses . .
. placing the safe and uninterrupted operation of the nation's air
traffic control system at increased and unnecessary risk.'' The FAA's
former chief information security officer told the press that he had
been frustrated by the failure to address obvious security holes in its
most important networks.
Similarly, at the Department of Energy's network that contains
sensitive information on critical infrastructure and nuclear
propulsion, investigators found ``numerous holes,'' according to the
New York Times.
At the IRS network, auditors found 69 vulnerabilities.
I believe it is not a matter of if, but of when government systems
will again be hit by a major cyberattack. And that is why I believe we
cannot wait to give one primary entity the authority--especially when
it already has the responsibility--to ensure that all ``Dot-gov''
government agencies meet robust cybersecurity standards, and that they
are able to deploy tools and technology across the government to detect
and prevent cyberattacks like the ones we saw at OPM. The Department of
Homeland Security is such an entity.
I know that some of my colleagues have argued that the NSA is the
best in
[[Page S5459]]
government at countering the cyber threat. I think that the NSA's
capabilities are impressive. They do an excellent job protecting our
defense and intelligence information systems. However, it would be
unfeasible to put the NSA in charge of the United States' civilian
cybersecurity.
DHS cyber capabilities have been steadily improving. It is deploying
innovative tools like EINSTEIN 3A. It has an extremely capable National
Cybersecurity and Communications Integration Center, NCCIC, located in
Virginia, that already detects threats and promotes information sharing
with industries through the so-called ISACs, Information Sharing and
Analysis Centers, that cover a range of industries from Aviation,
Defense Industries, the Financial and Banking sectors, Electricity, IT,
Communications and others.
As DHS Secretary Jeh Johnson recently stated: ``Legally, each agency
and department head has the responsibility for their own system--
legally, and I stress that to my colleagues. We have the responsibility
for the overall protection of the Federal civilian dot-gov world [. .
.] [W]here we need help in protecting Federal cybersecurity is legal--
making express our legal authority to receive information from other
departments and governments. [. . .] [W]e want the express legal
authority to make it plain that when we utilize things like EINSTEIN,
EINSTEIN 3A, those other agencies are authorized to share information
with us, to give us access to our network.''
In short, this bill would allow DHS--which already has the
responsibility to protect ``Dot-gov'' networks--the authority and the
ability to deploy tools and technology across the government to
proactively detect and prevent cyberattacks like the ones we saw at
OPM. The alternative is continuing the status quo, where each agency--
no matter how poorly--monitors its own networks and only asks for
outside assistance when it feels like it. That doesn't work. I urge my
colleagues to join us in supporting this bipartisan bill.
______
By Mr. LEAHY (for himself and Mr. Udall):
S. 1838. A bill to amend the Federal Election Campaign Act of 1971 to
clarify the treatment of coordinated expenditures as contributions to
candidates, and for other purposes; to the Committee on Rules and
Administration.
Mr. LEAHY. Mr. President, although we are still a year and a half
from the next presidential election, our perpetual campaign cycle
already seems to be in full swing. Among the many troubling trends we
are seeing is the rise of ``independent'' super PACs that support
candidates. These super PACs are supposed to operate completely
independent from the candidates' campaigns, but no one believes this to
be true. It is the worst kept secret in America.
A July 6, 2015, article in the Washington Post entitled ``It's bold,
but legal: How campaigns and their super PAC backers work together''
documents just how easily these super PACs and campaigns coordinate
their messages and skirt the rules. As the author notes:
For the first time, nearly every top presidential hopeful
has a personalized super PAC that can raise unlimited sums
and is run by close associates or former aides. Many also are
being boosted by nonprofits, which do not have to disclose
their donors.
The boldness of the candidates has elevated the importance
of wealthy donors to even greater heights than in the last
White House contest, when super PACs and nonprofits reported
spending more than $1 billion on federal races. Although they
are not supposed to coordinate directly with their
independent allies, candidates are finding creative ways to
work in concert with them.
Five years ago, in Citizens United v. FEC, five justices on the
Supreme Court departed from principles of judicial restraint and
decided to overturn an act of Congress under the broadest grounds
possible. In so doing, they overruled a century of practice and decades
of doctrine. The Court declared that corporations have a First
Amendment right to spend endlessly to finance and influence our
elections. This precedent then led to another court decision--
SpeechNow.org v. FEC--in the D.C. Circuit that resulted in the creation
of the super PAC. Super PACs are supposed to be independent
expenditure-only committees, and may raise unlimited sums of money from
corporations, unions, associations and individuals, then spend
unlimited sums to advocate for or against political candidates. But
nobody believes that they truly act independently.
That is why I am introducing the Stop Super PAC-Candidate
Coordination Act today. This bill would end the sham practice of
presidential candidates boldly and shamelessly exploiting our campaign
finance laws by coordinating with allegedly independent super PACs.
First, the bill codifies a definition of what constitutes
``coordination'' based on Supreme Court case law to make it more
difficult for coordination to occur. Second, it prohibits outside
groups from skirting the coordination provisions by stating that they
cannot simply create a ``firewall'' and claim that the there is an
independent division that is making independent expenditures. Third, it
prevents single-candidate super PACs from acting as an arm of the
candidates' campaign. It does this by including factors of when a super
PAC should be deemed a ``coordinated spender.'' Once the super PAC
falls into this category, the super PACs expenditures are then
considered to be ``coordinated expenditures'' and the super PAC is
subject to Federal contribution limits and prohibitions. Under existing
law, coordinated expenditures are defined as also being in-kind
contributions and are subject to the PAC contribution limit of $5,000
per year.
The penalty for any person who knowingly violates the coordination
provisions of this act is a civil fine that is three times the amount
of the coordinated expenditures involved in excess of the applicable
contribution limit. The act also imposes joint and several liability on
any director, manager, or officer of an outside spending group for any
unpaid penalties by the group violating the coordination rules.
Lastly, the bill prohibits candidates and their agents from raising
money for super PACs by prohibiting the raising of funds for any super
PAC or political committee that is not subject to Federal contribution
limits and reporting requirements. This bill would provide real rules
and put into place some regulations that would make it more difficult
for these super PACs to coordinate with candidates.
The issue of how our politics are paid for is an issue that is
important to the American people, and it is also important to
Vermonters. We have always remained steadfast in our belief that our
democracy should not be for sale, and that the size of your bank
account should not determine whether or not the government responds to
your views or needs.
This bill I introduce today is an incremental measure that would help
eliminate the sham of single-candidate super PACs and provide some real
rules to a process in which the American public is becoming more
cynical about every day. I hope that my fellow Senators from both sides
of the aisle will support this modest measure.
I understand why Vermonters are outraged by the devastating effects
of Citizens United and its progeny. In recent years I have held several
hearings to highlight the damage that Citizens United has done to our
political process. Last summer, I led the charge in the Senate
Judiciary Committee to consider a constitutional amendment to restore
the ability of lawmakers at both the Federal and State levels to rein
in the influence that billionaires and corporations now have on our
elections. The amendment would also have made clear that corporations
are not people. Although Senate Democrats were able to vote the
constitutional amendment out of the Judiciary Committee, Senate
Republicans filibustered the amendment on the floor and refused to
allow it an up-or-down vote. I will continue to do all I can to reverse
the devastating effects of Citizens United and its subsequent
decisions. This bill is one step towards addressing one of the problems
that has resulted from those decisions.
Mr. President, I ask unanimous consent that the Washington Post
article referenced above be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[[Page S5460]]
[From the Washington Post, July 6, 2015]
It's Bold, But Legal: How Campaigns and Their Super PAC Backers Work
Together
(By Matea Gold)
The 2016 presidential contenders are stretching the
latitude they have to work with their independent allies more
than candidates in recent elections ever dared, taking
advantage of a narrowly drawn rule that separates campaigns
from outside groups.
For the first time, nearly every top presidential hopeful
has a personalized super PAC that can raise unlimited sums
and is run by close associates or former aides. Many also are
being boosted by non-profits, which do not have to disclose
their donors.
The boldness of the candidates has elevated the importance
of wealthy donors to even greater heights than in the last
White House contest, when super PACs and nonprofits reported
spending more than $1 billion on federal races. Although they
are not supposed to coordinate directly with their
independent allies, candidates are finding creative ways to
work in concert with them.
Before former Florida governor Jeb Bush (R) announced his
bid in mid-June, the Right to Rise super PAC filmed footage
of him that the group plans to use in ads. Hillary Rodham
Clinton's campaign is collaborating directly with Correct the
Record, a super PAC providing the Democratic hopeful's team
with opposition research.
Top advisers to Wisconsin Gov. Scott Walker (R) have been
positioned at two big-money groups as they await his
presidential announcement next week. GOP candidate Carly
Fiorina has gone even further, outsourcing core functions
such as rapid response and event preparation to her allied
super PAC, the aptly named--CARLY for America.
The 2016 contenders and their big-money backers VIEW
GRAPHIC. The widespread cooperation--which many campaign
finance-experts say stretches the legal boundaries--indicates
that candidates and their advisers have little fear that they
will face serious scrutiny from law enforcement, despite the
Justice Department's successful prosecution this year of a
Virginia campaign operative for illegal coordination.
One main reason: Under Federal Election Commission rules,
there is no wall dividing candidates and independent groups.
In practice, it's more like a one-way mirror--with a
telephone on each side for occasional calls.
``The rules of affiliation are just about as porous as they
can be, and it amounts to a joke that there's no coordination
between these individual super PACs and the candidates,''
said Rep. David E. Price (D-N.C.), who has sponsored
legislation that would put stricter limits in place.
A close reading of FEC regulations reveals that campaigns
can do more than just publicly signal their needs to
independent groups, a practice that flourished in the 2014
midterms.
Operatives on both sides can talk to one another directly,
as long as they do not discuss candidate strategy. According
to an FEC rule, an independent group also can confer with a
campaign until this fall about ``issue ads'' featuring a
candidate. Some election-law lawyers think that a super PAC
could share its entire paid media plan, as long as the
candidate's team does not respond.
But those who defend the current system say that broader
rules could infringe on rights to free speech.
Right to Rise, a super PAC run by Mike Murphy, filmed
footage with then-undeclared candidate Jeb Bush to be used in
later commercials. (NBCU Photo Bank via Getty Images) ``Every
discussion you have cannot trigger illegal coordination,''
said Lee E. Goodman, a Republican appointee to the FEC.
``I understand some people look at relationships between
candidates and independent spenders and sense that those
relationships are too cozy,'' he added. ``Yet the courts have
said that you cannot prohibit friendships and knowledge of
each other.''
But many experts say that the limited-coordination rules
are emblematic of an outdated, incoherent and often
contradictory campaign finance framework.
``We're at this transitional point where the way money is
raised and spent and the costs of campaigns have changed so
dramatically,'' said Bob Bauer, a prominent campaign finance
lawyer who served as White House counsel for President Obama.
``The problem isn't that the law isn't being enforced--the
problem is that we need to rethink the whole thing from the
ground up.''
Political strategists on both sides of the aisle agree,
saying that navigating the complex legal thickets is
increasingly difficult.
``If you talk to three lawyers, you are likely to get three
different answers,'' said Phil Cox, executive director of
America Leads, a super PAC supporting Chris Christie, the
Republican governor of New Jersey. ``The system makes no
sense. It's crying out for reform. We need to put the power
back in the hands of the candidates and their campaigns, not
the outside groups.''
At the moment, though, an overhaul of campaign finance has
little bipartisan support in Congress. And members of the
long-polarized FEC appear more divided than ever. A
discussion at a recent public meeting about stricter
regulations devolved into hostile barbs.
The public is left with the sense that no one is following
the rules, said Ellen L. Weintraub, one of the Democrats on
the FEC.
``There is this basic notion that super PACs are supposed
to be separate from the candidates,'' she said. ``They look
at what's going on, and they say: `This doesn't look
separate. Where are the lines?' ''
A sweeping boundary was drawn by the Supreme Court in its
seminal 1976 Buckley v. Valeo decision, which said that
political activity by outside groups must be done ``totally
independently'' of candidates and parties. A similar standard
was set in the 2002--McCain-Feingold Act, which said that
independent expenditures cannot be made ``in cooperation,
consultation, or concert'' with a candidate.
But in practice, defining coordination has not been easy.
The FEC wrestled mightily with where to draw the lines,
issuing regulations that were challenged repeatedly in the
courts.
A set of FEC rules approved in 2010 prohibits a campaign
from coordinating with an independent group on a paid
communication. The agency laid out specific tests to
determine whether a campaign has illegally shared internal
strategy used to guide an independent group's advertising.
But the rules do not ban coordination in general--much less
conversations between each side.
Bobby Burchfield, a Republican campaign finance lawyer,
said that the clarity of current regulation helps avoid the
kind of intrusive investigations into groups, such as the
Christian Coalition, that the FEC once pursued. ``That had
the effect of suppressing and chilling political activity,''
he said.
Now, there's plenty of room to maneuver. Although a
campaign cannot share private strategy with a super PAC, it
can give a campaign information about its plans, as long the
group is not sharing something of value that could be
considered a contribution.
The FEC also has given candidates its blessing to appear at
super PAC fundraisers, as long as they do not solicit more
than $5,000--a decision that came in response to a query from
two Democratic super PACs in 2011.
Taken together, critics say, the narrow rules offer far too
many opportunities for candidates and their well-funded
outside allies to work in agreement.
The FEC ``couldn't imagine how bold people would be,'' said
Larry Noble, senior counsel at the Campaign Legal Center,
which supports tougher restrictions.
Right to Rise, the super PAC run by longtime Bush adviser
Mike Murphy, is set to serve as a massive external ad
operation bolstering the former governor's campaign. Murphy
told donors in a recent conference call that before Bush
announced his candidacy, the super PAC filmed footage of him
that the group plans to use in digital and TV spots,
according to an account in BuzzFeed.
``One of the new ideas that, you know, the governor had--
he's such an innovator--is we're going to be the first super
PAC to really be able to do just positive advertising,''
Murphy said.
Paul Lindsay, a spokesman for Right to Rise, said that
Murphy was referring to ``Governor Bush's historical
preference for positive advertising, which was consistent in
his previous elections and is no secret.''
Clinton's campaign is working closely with Correct the
Record, a liberal rapid-response group that refashioned
itself as a super PAC this year. The group says it can
coordinate directly with the campaign under a 2006 FEC rule
that made content posted free online off-limits to
regulation.
Correct the Record has more than 20 staffers and plans to
disseminate much of its research on its Web site and through
social media.
Any nonpublic information of value that it shares with the
Clinton staff will be purchased, according to a campaign
official.
Already, partisan critics have pounced, filing complaints
with the FEC alleging that the pro-Bush and pro-Clinton super
PACs are engaged in illegal coordination.
But if the agency launches an investigation, it would be a
first. Since 2010, the FEC has yet to open an investigation
into alleged illegal super PAC coordination, closing 29 such
complaints. In 28 of those cases, the agency's general
counsel did not recommend pursuing the matters, according to
Goodman of the FEC.
``We could capture all of this stuff if we had real
rules,'' said Fred Wertheimer, a longtime advocate of
reducing the influence of big money on politics. ``For all
practical purposes, there are no prohibitions against
coordination.''
______
By Mr. CORNYN (for himself, Mr. Toomey, Mr. Crapo, and Mr. Lee):
S. 1840. A bill to amend title 11, United States Code, to provide for
the liquidation, reorganization, or recapitalization of a covered
financial corporation, and for other purposes; to the Committee on
Banking, Housing, and Urban Affairs.
Mr. CORNYN. Mr. President, I ask unanimous consent that the text of
the bill be printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 1840
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
[[Page S5461]]
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Taxpayer Protection and
Responsible Resolution Act''.
SEC. 2. GENERAL PROVISIONS RELATING TO COVERED FINANCIAL
CORPORATIONS.
(a) Definition.--Section 101 of title 11, United States
Code, is amended by inserting the following after paragraph
(9):
``(9A) The term `covered financial corporation' means any
corporation incorporated or organized under any Federal or
State law, other than a stockbroker, a commodity broker, or
an entity of the kind specified in paragraph (2) or (3) of
section 109(b), that is--
``(A) a bank holding company, as defined in section 2(a) of
the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)); or
``(B) a corporation that exists for the primary purpose of
owning, controlling, and financing subsidiaries that are
predominantly engaged in activities that the Board of
Governors of the Federal Reserve System has determined are
financial in nature or incidental to such financial activity
for purposes of section 4(k) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1843(k)).''.
(b) Applicability of Chapters.--Section 103 of title 11,
United States Code, is amended--
(1) in subsection (a)--
(A) by striking ``section 1161'' and inserting ``sections
1161 and 1401''; and
(B) by striking ``or 13'' and inserting ``13, or 14'';
(2) in subsection (g), by inserting ``subsection (m) and''
before ``section''; and
(3) by adding at the end the following:
``(l) Chapter 14 of this title applies only in a case under
such chapter.
``(m) Except as otherwise provided in chapter 14 of this
title, chapter 11 of this title applies in a case under
chapter 14 of this title.''.
(c) Who May Be a Debtor.--Section 109 of title 11, United
States Code, is amended--
(1) in subsection (d)--
(A) by striking ``and'';
(B) by striking ``or a'' and inserting ``or''; and
(C) by inserting ``, or a covered financial corporation''
after ``Federal Deposit Insurance Corporation Improvement Act
of 1991''; and
(2) by adding at the end the following:
``(i) Only a covered financial corporation may be a debtor
in a case under chapter 14.''.
(d) Distribution of Property of the Estate.--Section
726(a)(1) of title 11, United States Code, is amended by
inserting ``in payment of any unpaid fees, costs, and
expenses of a special trustee appointed under section 1406,
and then'' after ``first,''.
(e) Confirmation of Plan.--Section 1129(a) of title 11,
United States Code, is amended by adding at the end the
following:
``(17) In a case under chapter 14, all payable fees, costs,
and expenses of the special trustee have been paid or the
plan provides for the payment of all such fees, costs, and
expenses, as of the effective date of the plan.
``(18) In a case under chapter 14, confirmation of the plan
is not likely to cause serious adverse effects on financial
stability in the United States.''.
(f) Qualification of Trustee.--Section 322(b)(2) of title
11, United States Code, is amended by striking ``The'' and
inserting ``In cases under chapter 14, the United States
trustee shall recommend to the court, and in all other cases,
the''.
SEC. 3. LIQUIDATION, REORGANIZATION, OR RECAPITALIZATION OF A
COVERED FINANCIAL CORPORATION.
(a) In General.--Title 11, United States Code, is amended
by inserting before chapter 15 the following:
``CHAPTER 14--LIQUIDATION, REORGANIZATION, OR RECAPITALIZATION OF A
COVERED FINANCIAL CORPORATION
``Sec.
``1401. Inapplicability of other sections.
``1402. Definitions for this chapter.
``1403. Commencement of a case concerning a covered financial
corporation.
``1404. Regulators.
``1405. Special transfer of property of the estate.
``1406. Special trustee.
``1407. Automatic stay; assumed debt.
``1408. Treatment of qualified financial contracts and affiliate
contracts.
``1409. Licenses, permits, and registrations.
``1410. Conversion to chapter 7.
``1411. Exemption from securities laws.
``1412. Inapplicability of certain avoiding powers.
``1413. Consideration of financial stability.
``Sec. 1401. Inapplicability of other sections
``Sections 303 and 321(c) do not apply in a case under this
chapter.
``Sec. 1402. Definitions for this chapter
``In this chapter, the following definitions shall apply:
``(1) The term `Board' means the Board of Governors of the
Federal Reserve System.
``(2) The term `bridge company' means a newly formed
corporation to which property of the estate may be
transferred under section 1405(a) and the equity securities
of which may be transferred to a special trustee under
section 1406(a).
``(3) The term `capital structure debt' means all unsecured
debt of the debtor for borrowed money for which the debtor is
the primary obligor, other than a qualified financial
contract and other than debt secured by a lien on property of
the estate that is to be transferred to a bridge company
pursuant to an order of the court under section 1405(a).
``(4) The term `contractual right' means a contractual
right of a kind described in section 555, 556, 559, 560, or
561.
``(5) The term `qualified financial contract' means any
contract of a kind defined in paragraph (25), (38A), (47), or
(53B) of section 101, section 741(7), or paragraph (4), (5),
(11), or (13) of section 761.
``(6) The term `special trustee' means a trustee appointed
under section 1406(a)(2)(A).
``(7) The term `trustee' means a person who is--
``(A) appointed or elected under section 1104; and
``(B) qualified under section 322 to serve as trustee in
the case or, in the absence of such person, the debtor in
possession.
``Sec. 1403. Commencement of a case concerning a covered
financial corporation
``(a) In General.--A case under this chapter may be
commenced by the filing of a petition with the court by an
entity that may be a debtor under section 301 if the entity
states to the best of its knowledge, under penalty of
perjury, in the petition that the entity is a covered
financial corporation.
``(b) Order for Relief.--The commencement of a case under
subsection (a) constitutes an order for relief under this
chapter.
``(c) Liability.--The members of the board of directors (or
body performing similar functions) of a covered financial
corporation shall not be liable to shareholders, creditors or
other parties in interest for--
``(1) a good faith filing of a case under this chapter; or
``(2) for any reasonable action taken, before or after the
date on which a case is commenced under this chapter, in good
faith in contemplation of or in connection with such a filing
or a transfer under section 1405 or section 1406.
``(d) Notice to Court.--Counsel to the entity that may be a
debtor shall provide, to the greatest extent practicable,
sufficient confidential notice to the Director of the
Administrative Office of the United States Courts and the
chief judge of the court of appeals embracing the district in
which the case is pending regarding the potential
commencement of a case under this chapter without disclosing
the identity of the potential debtor to allow the Director
and chief judge to designate and ensure the ready
availability of 1 of the bankruptcy judges designated under
section 298(b)(1) of title 28 to be available to preside over
the case.
``Sec. 1404. Regulators
``The Board, the Securities Exchange Commission, the
Comptroller of the Currency, and the Federal Deposit
Insurance Corporation may raise and may appear and be heard
on any issue in any case or proceeding under this chapter.
``Sec. 1405. Special transfer of property of the estate
``(a) In General.--
``(1) Transfer.--On request of the trustee, and after
notice and hearing not less than 24 hours after the order for
relief, the court may order a transfer under this section of
property of the estate, and the assignment of debt, executory
contracts, unexpired leases, qualified financial contracts,
and agreements of the debtor, to a bridge company. Except as
provided under this section, the provisions of sections 363
and 365 shall apply to a transfer and assignment under this
section.
``(2) Property of estate.--Upon the entry of an order
approving a transfer under this section, any property
transferred, and any debt, executory contract, unexpired
leases, qualified financial contract, or agreement assigned
under such order shall no longer be property of the estate.
``(b) Notice.--Unless the court orders otherwise, notice of
a request for an order under subsection (a) shall consist of
electronic or telephonic notice of not less than 24 hours
to--
``(1) the holders of the 20 largest secured claims against
the debtor;
``(2) the holders of the 20 largest unsecured claims
against the debtor;
``(3) counterparties to any debt, executory contract,
unexpired lease, qualified financial contract, or agreement
requested to be transferred under this section;
``(4) the Board;
``(5) the Federal Deposit Insurance Corporation;
``(6) the Secretary of the Treasury;
``(7) the Comptroller of the Currency;
``(8) the Securities and Exchange Commission;
``(9) the United States trustee or bankruptcy
administrator; and
``(10) each primary financial regulatory agency (as defined
in section 2(12) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (12 U.S.C. 5301(12))) with respect to
any affiliate the equity securities of which are proposed to
be transferred under this section.
``(c) Determination.--The court may not order a transfer
under this section unless the court determines, based upon a
preponderance of the evidence, that--
``(1) the transfer under this section is necessary to
prevent serious adverse effects on financial stability in the
United States;
``(2) the transfer does not provide for the assumption of
any capital structure debt by the bridge company;
``(3) the transfer does not provide for the transfer to the
bridge company of any property of the estate that is subject
to a lien securing a debt, executory contract, unexpired
lease, or agreement of the debtor unless--
[[Page S5462]]
``(A)(i) the bridge company assumes such debt, executory
contract, unexpired lease, or agreement, including any claims
arising in respect thereof that would not be allowed secured
claims under section 506(a)(1), and after giving effect to
such transfer, such property remains subject to the lien
securing such debt, executory contract, unexpired lease, or
agreement; and
``(ii) the court has determined that assumption of such
debt, executory contract, unexpired lease, or agreement by
the bridge company is in the best interest of the estate; or
``(B) such property is being transferred to the bridge
company in accordance with the provisions of section 363;
``(4) the transfer does not provide for the assumption by
the bridge company of any debt, executory contract, unexpired
lease, or agreement of the debtor secured by a lien on
property in which the estate has an interest unless the
transfer provides for such property to be transferred to the
bridge company in accordance with paragraph (3)(A) of this
subsection;
``(5) the transfer does not provide for the transfer of the
equity of the debtor;
``(6) the debtor has demonstrated that the bridge company
is not likely to fail to meet the obligations of any debt,
executory contract, qualified financial contract, unexpired
lease, or other agreement assumed and assigned to the bridge
company;
``(7) the transfer provides for the transfer to a special
trustee all of the equity securities in the bridge company
and appointment of a special trustee in accordance with
section 1406;
``(8) after giving effect to the transfer, adequate
provision has been made for the payment of the fees, costs,
and expenses of the estate and special trustee; and
``(9) the bridge company will have governing documents, and
initial directors and senior officers, that are in the best
interest of creditors and the estate.
``(d) Requirements Before Transfer.--Immediately before a
transfer under this section, the bridge company that is the
recipient of the transfer shall--
``(1) not have any property, debts, executory contracts,
unexpired leases, qualified financial contracts, or
agreements, other than any property acquired or debts,
executory contracts, unexpired leases, qualified financial
contracts, or agreements assumed when acting as a transferee
of a transfer under this section; and
``(2) have equity securities that are property of the
estate, which may be sold or distributed in accordance with
this title.
``Sec. 1406. Special trustee
``(a) In General.--
``(1) Transfer to special trustee.--An order approving a
transfer under section 1405 shall require the trustee to
transfer to a special trustee all of the equity securities in
the bridge company that is the recipient of a transfer under
section 1405 to hold in trust for the sole benefit of the
estate subject to satisfaction of the special trustee's fees,
costs, and expenses. The trust of which the special trustee
is the trustee shall be a newly formed trust governed by a
trust agreement approved by the court as in the best
interests of the estate, and shall exist for the sole purpose
of holding and administering, and shall be permitted to
dispose of, the equity securities of the bridge company in
accordance with the trust agreement.
``(2) Appointment of special trustee.--
``(A) In general.--A special trustee shall be qualified and
independent and shall be appointed by the court.
``(B) Proposal by trustee.--In connection with the hearing
to approve a transfer under section 1405, the trustee may
propose to the court a person to serve as special trustee, if
the trustee confirms to the court that the Board has been
consulted regarding the identity of the proposed special
trustee and advises the court of the results of such
consultation.
``(b) Trust Agreement.--The trust agreement governing a
trust formed under subsection (a)(1) shall provide--
``(1) for the payment of the fees, costs, expenses, and
indemnities of the special trustee from the assets of the
debtor's estate;
``(2) that the special trustee provide--
``(A) quarterly reporting to the estate, which shall be
filed with the court; and
``(B) information about the bridge company reasonably
requested by a party in interest to prepare a disclosure
statement for a plan providing for distribution of any
securities of the bridge company if such information is
necessary to prepare such disclosure statement;
``(3) that for as long as the equity securities of the
bridge company are held by the trust, the special trustee
shall file a notice with the court in connection with--
``(A) any change in a director or senior officer of the
bridge company;
``(B) any modification to the governing documents of the
bridge company; or
``(C) any material corporate action of the bridge company,
including--
``(i) recapitalization;
``(ii) a material borrowing;
``(iii) termination of an intercompany debt or guarantee;
``(iv) a transfer of a substantial portion of the assets of
the bridge company; or
``(v) the issuance or sale of any securities of the bridge
company;
``(4) that any sale of any equity securities of the bridge
company shall not be consummated until the special trustee
consults with the Federal Deposit Insurance Corporation and
the Board regarding such sale and discloses the results of
such consultation with the court;
``(5) that, subject to reserves for payments permitted
under paragraph (1) provided for in the trust agreement, the
proceeds of the sale of any equity securities of the bridge
company by the special trustee be held in trust for the
benefit of or transferred to the estate;
``(6) the process and guidelines for the replacement of the
special trustee; and
``(7) that the property held in trust by the special
trustee is subject to distribution in accordance with
subsection (c).
``(c) Distribution of Assets Held in Trust.--
``(1) In general.--The special trustee shall distribute the
assets held in trust--
``(A) if the court confirms a plan in the case, in
accordance with the plan on the effective date of the plan;
or
``(B) if the case is converted to a case under chapter 7
under section 1410.
``(2) Termination.--As soon as practicable after a final
distribution under paragraph (1), the office of the special
trustee shall terminate, except as may be necessary to wind
up and conclude the business and financial affairs of the
trust.
``(d) Applicability.--After a transfer to the special
trustee under this section, the special trustee shall be
subject only to applicable nonbankruptcy law, and the actions
and conduct of the special trustee shall no longer be subject
to approval by the court in the case under this chapter.
``Sec. 1407. Automatic stay; assumption
``(a) Automatic Stay.--
``(1) In general.--A petition filed under section 1403
operates as a stay, applicable to all entities, of the
acceleration, termination, or modification of any debt,
contract, lease, or agreement of the kind described in
paragraph (2), or of any right or obligation under any such
debt, contract, lease, or agreement, solely because of--
``(A) a default by the debtor under any such debt,
contract, lease, or agreement; or
``(B) a provision in such debt, contract, lease, or
agreement, or in applicable nonbankruptcy law, that is
conditioned on--
``(i) the insolvency or financial condition of the debtor
at any time before the closing of the case;
``(ii) the commencement of a case under this title
concerning the debtor;
``(iii) the appointment of or taking possession by a
trustee in a case under this title concerning the debtor or
by a custodian before the commencement of the case; or
``(iv) a credit rating agency rating, or absence or
withdrawal of a credit rating agency rating of--
``(I) the debtor at any time after the commencement of the
case;
``(II) an affiliate during the 48 hours after the
commencement of the case;
``(III) the bridge company while the trustee or the special
trustee is a direct or indirect beneficial holder of more
than 50 percent of the equity securities of--
``(aa) the bridge company; or
``(bb) an affiliate, if all of the direct or indirect
interests in the affiliate that are property of the estate
are transferred under section 1406; or
``(IV) an affiliate while the trustee or the special
trustee is a direct or indirect beneficial holder of more
than 50 percent of the equity securities of--
``(aa) the bridge company; or
``(bb) the affiliate, if all of the direct or indirect
interests in the affiliate that are property of the estate
are transferred under section 1405.
``(2) Debt, contract, lease, or agreement.--A debt,
contract, lease, or agreement described in this paragraph--
``(A) is--
``(i) any debt, executory contract, or unexpired lease of
the debtor;
``(ii) any agreement under which the debtor issued or is
obligated for debt;
``(iii) any debt, executory contract, or unexpired lease of
an affiliate; and
``(iv) any agreement under which an affiliate issued or is
obligated for debt; and
``(B) does not include capital structure debt or qualified
financial contracts.
``(3) Termination of stay.--A stay under this subsection
terminates--
``(A) as to the debtor, upon the earliest of--
``(i) 48 hours after the commencement of the case;
``(ii) assumption of the debt, contract, lease, or
agreement by the bridge company under an order authorizing a
transfer under section 1405;
``(iii) a final order of the court denying the request for
a transfer of the debt, contract, lease, or agreement under
section 1405; or
``(iv) the time the case is dismissed; and
``(B) as to an affiliate, upon the earliest of--
``(i) 48 hours after the commencement of the case, if the
court has not ordered a transfer under section 1405;
``(ii) the entry of an order authorizing a transfer under
section 1405 in which the direct or indirect interests in the
affiliate that are property of the estate are not transferred
under section 1405;
``(iii) a final order of the court denying the request for
a transfer under section 1405; or
``(iv) the time the case is dismissed.
``(4) Applicability.--Sections (d), (e), (f), and (g) of
section 362 apply to a stay under this subsection.
[[Page S5463]]
``(b) Assumption by Bridge Company.--A debt, executory
contract, unexpired lease of the debtor, or any other
agreement described in subsection (a)(2), may be assumed by a
bridge company in a transfer under section 1405
notwithstanding any provision in an agreement or in
applicable nonbankruptcy law that--
``(1) prohibits, restricts, or conditions the assignment of
the debt, contract, lease, or agreement; or
``(2) accelerates, terminates, or modifies, or permits a
party other than the debtor to accelerate, terminate, or
modify, the debt, contract, lease, or agreement on account
of--
``(A) the assignment of the debt, contract, lease, or
agreement; or
``(B) a change in control of any party to the debt,
contract, lease, or agreement.
``(c) No Acceleration, Termination, or Modification of
Agreements of Debtor.--
``(1) In general.--A debt, contract, lease, or agreement of
the kind described in subsection (a)(2) may not be
accelerated, terminated, or modified, and any right or
obligation under such debt, contract, lease, or agreement may
not be accelerated, terminated, or modified, as to the bridge
company solely because of a provision in the debt, contract,
lease, or agreement or in applicable nonbankruptcy law--
``(A) of the kind described in subsection (a)(1)(B) as
applied to the debtor;
``(B) that prohibits, restricts, or conditions the
assignment of the debt, contract, lease, or agreement; or
``(C) that accelerates, terminates, or modifies, or permits
a party other than the debtor to accelerate, terminate, or
modify, the debt, contract, lease or agreement, on account
of--
``(i) the assignment of the debt, contract, lease, or
agreement; or
``(ii) a change in control of any party to the debt,
contract, lease, or agreement.
``(2) Default.--If there has been a default by the debtor
under a provision other than the kind described in paragraph
(1) in a debt, contract, lease, or agreement of the kind
described in subsection (a)(2), the bridge company may assume
such debt, contract, lease, or agreement only if the bridge
company--
``(A) cures, or provides adequate assurance in connection
with a transfer under section 1405 that the bridge company
will promptly cure, the default;
``(B) compensates, or provides adequate assurance in
connection with a transfer under section 1405 that the bridge
company will promptly compensate, a party other than the
debtor to the debt, contract, lease, or agreement, for any
actual pecuniary loss to the party resulting from the
default; and
``(C) provides adequate assurance in connection with a
transfer under section 1405 of future performance under the
debt, contract, lease, or agreement, as determined by the
court under section 1405(c)(4).
``Sec. 1408. Treatment of qualified financial contracts and
affiliate contracts
``(a) In General.--Notwithstanding sections 362(b)(6),
362(b)(7), 362(b)(17), 362(b)(27), 362(o), 555, 556, 559,
560, and 561, a petition filed under section 1403 operates as
a stay, during the period specified in section 1407(a)(3)(A),
applicable to all entities, of the exercise of a contractual
right--
``(1) to cause the acceleration, termination, modification,
or liquidation of a qualified financial contract of the
debtor or an affiliate;
``(2) to offset or net out any termination value, payment
amount, or other transfer obligation arising under or in
connection with a qualified financial contract of the debtor
or an affiliate; or
``(3) under any security agreement or arrangement or other
credit enhancement forming a part of or related to a
qualified financial contract of the debtor or an affiliate.
``(b) Payment and Delivery Obligations.--
``(1) In general.--During the period specified in section
1407(a)(3)(A), the trustee or the affiliate shall perform all
payment and delivery obligations under a qualified financial
contract of the debtor or the affiliate, as the case may be,
that become due after the commencement of the case. The stay
provided under subsection (a) terminates as to a qualified
financial contract of the debtor or an affiliate immediately
upon the failure of the trustee or the affiliate, as the case
may be, to perform any such obligation during such period.
``(2) Failure to perform.--Any failure by a counterparty to
any qualified financial contract of the debtor or any
affiliate to perform any payment or delivery obligation under
such qualified financial contract, including during the
pendency of the stay provided under subsection (a), shall
constitute a breach of such qualified financial contract by
the counterparty.
``(c) Assignment or Assumption.--Notwithstanding any
provision of subsection 1407(b) or applicable nonbankruptcy
law, subject to the court's approval, a qualified financial
contract between an entity and the debtor may be assigned to
or assumed by the bridge company in a transfer under section
1405 only if--
``(1) all qualified financial contracts between the entity
and the debtor are assigned to and assumed by the bridge
company in the transfer under section 1405;
``(2) all claims of the entity against the debtor under any
qualified financial contract between the entity and the
debtor (other than any claim that, under the terms of the
qualified financial contract, is subordinated to the claims
of general unsecured creditors) are assigned to and assumed
by the bridge company;
``(3) all claims of the debtor against the entity under any
qualified financial contract between the entity and the
debtor are assigned to and assumed by the bridge company; and
``(4) all property securing or any other credit enhancement
furnished by the debtor for any qualified financial contract
described in paragraph (1) or any claim described in
paragraph (2) or (3) under any qualified financial contract
between the entity and the debtor is assigned to and assumed
by the bridge company.
``(d) No Acceleration, Termination, or Modification of
Qualified Financial Contracts.--Notwithstanding any provision
of a qualified financial contract or of applicable
nonbankruptcy law, a qualified financial contract of the
debtor that is assumed by or assigned to the bridge company
in a transfer under section 1405 may not be accelerated,
terminated, modified, or liquidated after the entry of the
order approving a transfer under section 1405, and any right
or obligation under the qualified financial contract may not
be accelerated, terminated, or modified, after the entry of
the order approving a transfer under section 1405 solely
because of a provision of the kind described in section
1407(c)(1), other than a provision of the kind described in
section 1407(b) that occurs after property of the estate no
longer includes a direct beneficial interest or an indirect
beneficial interest through the special trustee, in more than
50 percent of the equity securities of the bridge company.
``(e) No Acceleration, Termination, Modification, or
Liquidation of Agreements of Affiliates.--Notwithstanding any
provision in any agreement or in applicable nonbankruptcy
law, an agreement (including an executory contract, unexpired
lease, qualified financial contract, or an agreement under
which the affiliate issued or is obligated for debt) of an
affiliate that is assumed by or assigned to the bridge
company in a transfer under section 1405, and any right or
obligation under such agreement, may not be accelerated,
terminated, modified, or liquidated after the entry of the
order approving a transfer under section 1405 solely because
of a provision of the kind described in section 1407(c)(1),
other than a provision of the kind described in section
1407(b) that occurs after the bridge company is no longer a
direct or indirect beneficial holder of more than 50 percent
of the equity securities of the affiliate at any time after
the commencement of the case if--
``(1) all direct or indirect interests in the affiliate
that are property of the estate are transferred under section
1405 to the bridge company within the period specified in
subsection (a);
``(2) the bridge company assumes--
``(A) any guarantee or other credit enhancement issued by
the debtor relating to the agreement of the affiliate; and
``(B) any right of setoff, netting arrangement, or debt of
the debtor that directly arises out of or directly relates to
the guarantee or credit enhancement; and
``(3) any property of the estate that directly serves as
collateral for the guarantee or credit enhancement is
transferred to the bridge company.
``Sec. 1409. Licenses, permits, and registrations
``(a) In General.--Notwithstanding any otherwise applicable
nonbankruptcy law, if a request is made under section 1405
for a transfer of property of the estate, any Federal, State,
or local license, permit, or registration that the debtor or
an affiliate had immediately before the commencement of the
case and that is proposed to be transferred under section
1405 may not be accelerated, terminated, or modified at any
time after the request solely on account of--
``(1) the insolvency or financial condition of the debtor
at any time before the closing of the case;
``(2) the commencement of a case under this title
concerning the debtor;
``(3) the appointment of or taking possession by a trustee
in a case under this title concerning the debtor or by a
custodian before the commencement of the case; or
``(4) a transfer under section 1405.
``(b) Validity of Certain Licenses, Permits, and
Registrations.--Notwithstanding any otherwise applicable
nonbankruptcy law, any Federal, State, or local license,
permit, or registration that the debtor had immediately
before the commencement of the case that is included in a
transfer under section 1405 shall be valid and all rights and
obligations thereunder shall vest in the bridge company.
``Sec. 1410. Conversion to chapter 7
``Notwithstanding section 109(b), a court may convert a
case under this chapter to a case under chapter 7 if--
``(1) a transfer described in section 1405 has taken place;
``(2) the court has ordered the appointment of a special
trustee under section 1406; and
``(3) the court finds, after providing notice and
conducting a hearing, that the conversion of the case is in
the best interests of the creditors and the estate.
``Sec. 1411. Exemption from securities laws
``For purposes of section 1145, a security of the bridge
company shall be deemed to be a security of a successor to
the debtor under a plan if the court approves the disclosure
statement for the plan as providing adequate information (as
defined in section 1125(a)) about the bridge company and the
security.
[[Page S5464]]
``Sec. 1412. Inapplicability of certain avoiding powers
``A transfer made or an obligation incurred by the debtor
to an affiliate prior to or after the commencement of the
case, including any obligation released by the debtor or the
estate to or for the benefit of an affiliate, in
contemplation of or in connection with a transfer under
section 1405, is not avoidable under section 544, 547,
548(a)(1)(B), or 549, or under any similar nonbankruptcy law.
``Sec. 1413. Consideration of financial stability
``The court may consider the effect that any decision in
connection with this chapter may have on financial stability
in the United States.''.
(b) Technical and Conforming Amendment.--The table of
chapters for title 11, United States Code, is amended by
inserting after the item relating to chapter 13 the
following:
``14. Liquidation, reorganization, or recapitalization of a covered
financial corporation..................................1401.''.....
SEC. 4. AMENDMENTS TO TITLE 28, UNITED STATES CODE.
(a) Amendment to Chapter 13.--Chapter 13 of title 28,
United States Code, is amended by adding at the end the
following:
``Sec. 298. Judge for a case under chapter 14 of title 11
``(a) Notwithstanding section 295, the Chief Justice of the
United States shall designate not fewer than 10 bankruptcy
judges to be available to hear a case under chapter 14 of
title 11. Bankruptcy judges may request to be considered by
the Chief Justice of the United States for such designation.
``(b)(1) Notwithstanding section 155, a case under chapter
14 of title 11 shall be heard under section 157 by a
bankruptcy judge designated under subsection (a), who shall
be assigned to hear such case by the chief judge of the court
of appeals for the circuit embracing the district in which
the case is pending.
``(2) If the bankruptcy judge assigned to hear a case under
paragraph (1) is not assigned to the district in which the
case is pending, the bankruptcy judge shall be temporarily
assigned to the district. To the greatest extent practicable,
the approvals required under section 155(a) shall be
obtained.
``(c) A case under chapter 14 of title 11, and all
proceedings in the case, shall take place in the district in
which the case is pending.''.
(b) Amendment to Section 1334.--Section 1334 of title 28,
United States Code, is amended by adding at the end the
following:
``(f) This section does not grant jurisdiction to the
district court after a transfer pursuant to an order under
section 1405 of title 11 of any proceeding related to a
special trustee appointed, or to a bridge company formed to
accomplish a transfer, under section 1405 of title 11.''.
(c) Technical and Conforming Amendment.--The table of
sections for chapter 13 of title 28, United States Code, is
amended by adding at the end the following:
``298. Judge for a case under chapter 14 of title 11.''.
SEC. 5. REPEAL OF TITLE II OF DODD-FRANK WALL STREET REFORM
AND CONSUMER PROTECTION ACT.
(a) In General.--Title II of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Public Law 111-203) is
repealed and any Federal law amended by such title shall, on
and after the date of enactment of this Act, be effective as
if title II of the Dodd-Frank Wall Street Reform and Consumer
Protection Act had not been enacted.
(b) Conforming Amendments.--
(1) Dodd-frank wall street reform and consumer protection
act.--The Dodd-Frank Wall Street Reform and Consumer
Protection Act is amended--
(A) in the table of contents, by striking all items
relating to title II;
(B) in section 165(d)(6), by striking ``, a receiver
appointed under title II,'';
(C) in section 716(g), by striking ``or a covered financial
company under title II'';
(D) in section 1105(e)(5), by striking ``amount of any
securities issued under that chapter 31 for such purpose
shall be treated in the same manner as securities issued
under section 208(n)(5)(E)'' and inserting ``issuances of
such securities under that chapter 31 for such purpose shall
by treated as public debt transactions of the United States,
and the proceeds from the sale of any obligations acquired by
the Secretary under this paragraph shall be deposited into
the Treasury of the United States as miscellaneous
receipts''; and
(E) in section 1106(c)(2)(A)--
(i) in clause (i), by inserting ``, other than a covered
financial corporation (as defined in section 101(9A) of title
11, United States Code),'' after ``company''; and
(ii) in clause (ii), by inserting ``, other than a covered
financial corporation (as defined in section 101(9A) of title
11, United States Code),'' after ``company''.
(2) Federal deposit insurance act.--Section 10(b)(3)(A) of
the Federal Deposit Insurance Act (12 U.S.C. 1820(b)(3)(A))
is amended by striking ``, or of such nonbank financial
company supervised by the Board of Governors or bank holding
company described in section 165(a) of the Financial
Stability Act of 2010, for the purpose of implementing its
authority to provide for orderly liquidation of any such
company under title II of that Act''.
(3) Federal reserve act.--Section 13(3) of the Federal
Reserve Act (12 U.S.C. 343(3)) is amended--
(A) in subparagraph (B)--
(i) in clause (ii), by striking ``, resolution under title
II of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, or'' and inserting ``or is subject to
resolution under''; and
(ii) in clause (iii), by striking ``, resolution under
title II of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, or'' and inserting ``or resolution under'';
and
(B) by striking subparagraph (E).
SEC. 6. LIMITATION ON ADVANCES FROM A FEDERAL RESERVE BANK.
Section 10B(b) of the Federal Reserve Act (12 U.S.C.
347b(b)) is amended--
(1) by redesignating paragraph (5) as paragraph (6);
(2) by inserting after paragraph (4) the following:
``(5) Limitation on advances to covered financial
corporations and bridge companies.--Notwithstanding paragraph
(2), a Federal Reserve bank may not make advances to any
covered financial corporation that is a debtor in a pending
case under chapter 14 of title 11, United States Code, or to
a bridge company, for the purpose of providing debtor-in-
possession financing pursuant to section 364 of such
title.''; and
(3) in paragraph (6), as redesignated--
(A) by redesignating subparagraphs (B) through (E) as
subparagraphs (D) through (G), respectively; and
(B) by inserting after subparagraph (A) the following:
``(B) Bridge company.--The term `bridge company' has the
same meaning as in section 1402(2) of title 11, United States
Code.
``(C) Covered financial corporation.--The term `covered
financial corporation' has the same meaning as in section
101(9A) of title 11, United States Code.''.
SEC. 7. LIMITATION ON USE OF FEDERAL FUNDS.
Notwithstanding any other provision of law, no funds
appropriated to the Federal Government may be paid to a
covered financial corporation (as defined in section 101(9A)
of title 11, United States Code, as amended by section 2(a)
of this Act), or to a creditor of any covered financial
corporation, to satisfy a claim in a case under chapter 14 of
title 11, United States Code.
______
By Mr. CORNYN (for himself and Mr. Toomey):
S. 1841. A bill to amend title 11, United States Code, to provide for
the liquidation, reorganization, or recapitalization of a covered
financial corporation, and for other purposes; to the Committee on the
Judiciary.
Mr. CORNYN. Mr. President, I ask unanimous consent that the text of
the bill be printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 1841
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Taxpayer Protection and
Responsible Resolution Act''.
SEC. 2. GENERAL PROVISIONS RELATING TO COVERED FINANCIAL
CORPORATIONS.
(a) Definition.--Section 101 of title 11, United States
Code, is amended by inserting the following after paragraph
(9):
``(9A) The term `covered financial corporation' means any
corporation incorporated or organized under any Federal or
State law, other than a stockbroker, a commodity broker, or
an entity of the kind specified in paragraph (2) or (3) of
section 109(b), that is--
``(A) a bank holding company, as defined in section 2(a) of
the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)); or
``(B) a corporation that exists for the primary purpose of
owning, controlling, and financing subsidiaries that are
predominantly engaged in activities that the Board of
Governors of the Federal Reserve System has determined are
financial in nature or incidental to such financial activity
for purposes of section 4(k) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1843(k)).''.
(b) Applicability of Chapters.--Section 103 of title 11,
United States Code, is amended--
(1) in subsection (a)--
(A) by striking ``section 1161'' and inserting ``sections
1161 and 1401''; and
(B) by striking ``or 13'' and inserting ``13, or 14'';
(2) in subsection (g), by inserting ``subsection (m) and''
before ``section''; and
(3) by adding at the end the following:
``(l) Chapter 14 of this title applies only in a case under
such chapter.
``(m) Except as otherwise provided in chapter 14 of this
title, chapter 11 of this title applies in a case under
chapter 14 of this title.''.
(c) Who May Be a Debtor.--Section 109 of title 11, United
States Code, is amended--
(1) in subsection (d)--
(A) by striking ``and'';
(B) by striking ``or a'' and inserting ``or''; and
(C) by inserting ``, or a covered financial corporation''
after ``Federal Deposit Insurance Corporation Improvement Act
of 1991''; and
(2) by adding at the end the following:
``(i) Only a covered financial corporation may be a debtor
in a case under chapter 14.''.
[[Page S5465]]
(d) Distribution of Property of the Estate.--Section
726(a)(1) of title 11, United States Code, is amended by
inserting ``in payment of any unpaid fees, costs, and
expenses of a special trustee appointed under section 1406,
and then'' after ``first,''.
(e) Confirmation of Plan.--Section 1129(a) of title 11,
United States Code, is amended by adding at the end the
following:
``(17) In a case under chapter 14, all payable fees, costs,
and expenses of the special trustee have been paid or the
plan provides for the payment of all such fees, costs, and
expenses, as of the effective date of the plan.
``(18) In a case under chapter 14, confirmation of the plan
is not likely to cause serious adverse effects on financial
stability in the United States.''.
(f) Qualification of Trustee.--Section 322(b)(2) of title
11, United States Code, is amended by striking ``The'' and
inserting ``In cases under chapter 14, the United States
trustee shall recommend to the court, and in all other cases,
the''.
SEC. 3. LIQUIDATION, REORGANIZATION, OR RECAPITALIZATION OF A
COVERED FINANCIAL CORPORATION.
(a) In General.--Title 11, United States Code, is amended
by inserting before chapter 15 the following:
``CHAPTER 14--LIQUIDATION, REORGANIZATION, OR RECAPITALIZATION OF A
COVERED FINANCIAL CORPORATION
``Sec.
``1401. Inapplicability of other sections.
``1402. Definitions for this chapter.
``1403. Commencement of a case concerning a covered financial
corporation.
``1404. Regulators.
``1405. Special transfer of property of the estate.
``1406. Special trustee.
``1407. Automatic stay; assumed debt.
``1408. Treatment of qualified financial contracts and affiliate
contracts.
``1409. Licenses, permits, and registrations.
``1410. Conversion to chapter 7.
``1411. Exemption from securities laws.
``1412. Inapplicability of certain avoiding powers.
``1413. Consideration of financial stability.
``Sec. 1401. Inapplicability of other sections
``Sections 303 and 321(c) do not apply in a case under this
chapter.
``Sec. 1402. Definitions for this chapter
``In this chapter, the following definitions shall apply:
``(1) The term `Board' means the Board of Governors of the
Federal Reserve System.
``(2) The term `bridge company' means a newly formed
corporation to which property of the estate may be
transferred under section 1405(a) and the equity securities
of which may be transferred to a special trustee under
section 1406(a).
``(3) The term `capital structure debt' means all unsecured
debt of the debtor for borrowed money for which the debtor is
the primary obligor, other than a qualified financial
contract and other than debt secured by a lien on property of
the estate that is to be transferred to a bridge company
pursuant to an order of the court under section 1405(a).
``(4) The term `contractual right' means a contractual
right of a kind described in section 555, 556, 559, 560, or
561.
``(5) The term `qualified financial contract' means any
contract of a kind defined in paragraph (25), (38A), (47), or
(53B) of section 101, section 741(7), or paragraph (4), (5),
(11), or (13) of section 761.
``(6) The term `special trustee' means a trustee appointed
under section 1406(a)(2)(A).
``(7) The term `trustee' means a person who is--
``(A) appointed or elected under section 1104; and
``(B) qualified under section 322 to serve as trustee in
the case or, in the absence of such person, the debtor in
possession.
``Sec. 1403. Commencement of a case concerning a covered
financial corporation
``(a) In General.--A case under this chapter may be
commenced by the filing of a petition with the court by an
entity that may be a debtor under section 301 if the entity
states to the best of its knowledge, under penalty of
perjury, in the petition that the entity is a covered
financial corporation.
``(b) Order for Relief.--The commencement of a case under
subsection (a) constitutes an order for relief under this
chapter.
``(c) Liability.--The members of the board of directors (or
body performing similar functions) of a covered financial
corporation shall not be liable to shareholders, creditors or
other parties in interest for--
``(1) a good faith filing of a case under this chapter; or
``(2) for any reasonable action taken, before or after the
date on which a case is commenced under this chapter, in good
faith in contemplation of or in connection with such a filing
or a transfer under section 1405 or section 1406.
``(d) Notice to Court.--Counsel to the entity that may be a
debtor shall provide, to the greatest extent practicable,
sufficient confidential notice to the Director of the
Administrative Office of the United States Courts and the
chief judge of the court of appeals embracing the district in
which the case is pending regarding the potential
commencement of a case under this chapter without disclosing
the identity of the potential debtor to allow the Director
and chief judge to designate and ensure the ready
availability of 1 of the bankruptcy judges designated under
section 298(b)(1) of title 28 to be available to preside over
the case.
``Sec. 1404. Regulators
``The Board, the Securities Exchange Commission, the
Comptroller of the Currency, and the Federal Deposit
Insurance Corporation may raise and may appear and be heard
on any issue in any case or proceeding under this chapter.
``Sec. 1405. Special transfer of property of the estate
``(a) In General.--
``(1) Transfer.--On request of the trustee, and after
notice and hearing not less than 24 hours after the order for
relief, the court may order a transfer under this section of
property of the estate, and the assignment of debt, executory
contracts, unexpired leases, qualified financial contracts,
and agreements of the debtor, to a bridge company. Except as
provided under this section, the provisions of sections 363
and 365 shall apply to a transfer and assignment under this
section.
``(2) Property of estate.--Upon the entry of an order
approving a transfer under this section, any property
transferred, and any debt, executory contract, unexpired
leases, qualified financial contract, or agreement assigned
under such order shall no longer be property of the estate.
``(b) Notice.--Unless the court orders otherwise, notice of
a request for an order under subsection (a) shall consist of
electronic or telephonic notice of not less than 24 hours
to--
``(1) the holders of the 20 largest secured claims against
the debtor;
``(2) the holders of the 20 largest unsecured claims
against the debtor;
``(3) counterparties to any debt, executory contract,
unexpired lease, qualified financial contract, or agreement
requested to be transferred under this section;
``(4) the Board;
``(5) the Federal Deposit Insurance Corporation;
``(6) the Secretary of the Treasury;
``(7) the Comptroller of the Currency;
``(8) the Securities and Exchange Commission;
``(9) the United States trustee or bankruptcy
administrator; and
``(10) each primary financial regulatory agency (as defined
in section 2(12) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (12 U.S.C. 5301(12))) with respect to
any affiliate the equity securities of which are proposed to
be transferred under this section.
``(c) Determination.--The court may not order a transfer
under this section unless the court determines, based upon a
preponderance of the evidence, that--
``(1) the transfer under this section is necessary to
prevent serious adverse effects on financial stability in the
United States;
``(2) the transfer does not provide for the assumption of
any capital structure debt by the bridge company;
``(3) the transfer does not provide for the transfer to the
bridge company of any property of the estate that is subject
to a lien securing a debt, executory contract, unexpired
lease, or agreement of the debtor unless--
``(A)(i) the bridge company assumes such debt, executory
contract, unexpired lease, or agreement, including any claims
arising in respect thereof that would not be allowed secured
claims under section 506(a)(1), and after giving effect to
such transfer, such property remains subject to the lien
securing such debt, executory contract, unexpired lease, or
agreement; and
``(ii) the court has determined that assumption of such
debt, executory contract, unexpired lease, or agreement by
the bridge company is in the best interest of the estate; or
``(B) such property is being transferred to the bridge
company in accordance with the provisions of section 363;
``(4) the transfer does not provide for the assumption by
the bridge company of any debt, executory contract, unexpired
lease, or agreement of the debtor secured by a lien on
property in which the estate has an interest unless the
transfer provides for such property to be transferred to the
bridge company in accordance with paragraph (3)(A) of this
subsection;
``(5) the transfer does not provide for the transfer of the
equity of the debtor;
``(6) the debtor has demonstrated that the bridge company
is not likely to fail to meet the obligations of any debt,
executory contract, qualified financial contract, unexpired
lease, or other agreement assumed and assigned to the bridge
company;
``(7) the transfer provides for the transfer to a special
trustee all of the equity securities in the bridge company
and appointment of a special trustee in accordance with
section 1406;
``(8) after giving effect to the transfer, adequate
provision has been made for the payment of the fees, costs,
and expenses of the estate and special trustee; and
``(9) the bridge company will have governing documents, and
initial directors and senior officers, that are in the best
interest of creditors and the estate.
``(d) Requirements Before Transfer.--Immediately before a
transfer under this section, the bridge company that is the
recipient of the transfer shall--
``(1) not have any property, debts, executory contracts,
unexpired leases, qualified financial contracts, or
agreements, other than any property acquired or debts,
executory contracts, unexpired leases, qualified financial
contracts, or agreements assumed when
[[Page S5466]]
acting as a transferee of a transfer under this section; and
``(2) have equity securities that are property of the
estate, which may be sold or distributed in accordance with
this title.
``Sec. 1406. Special trustee
``(a) In General.--
``(1) Transfer to special trustee.--An order approving a
transfer under section 1405 shall require the trustee to
transfer to a special trustee all of the equity securities in
the bridge company that is the recipient of a transfer under
section 1405 to hold in trust for the sole benefit of the
estate subject to satisfaction of the special trustee's fees,
costs, and expenses. The trust of which the special trustee
is the trustee shall be a newly formed trust governed by a
trust agreement approved by the court as in the best
interests of the estate, and shall exist for the sole purpose
of holding and administering, and shall be permitted to
dispose of, the equity securities of the bridge company in
accordance with the trust agreement.
``(2) Appointment of special trustee.--
``(A) In general.--A special trustee shall be qualified and
independent and shall be appointed by the court.
``(B) Proposal by trustee.--In connection with the hearing
to approve a transfer under section 1405, the trustee may
propose to the court a person to serve as special trustee, if
the trustee confirms to the court that the Board has been
consulted regarding the identity of the proposed special
trustee and advises the court of the results of such
consultation.
``(b) Trust Agreement.--The trust agreement governing a
trust formed under subsection (a)(1) shall provide--
``(1) for the payment of the fees, costs, expenses, and
indemnities of the special trustee from the assets of the
debtor's estate;
``(2) that the special trustee provide--
``(A) quarterly reporting to the estate, which shall be
filed with the court; and
``(B) information about the bridge company reasonably
requested by a party in interest to prepare a disclosure
statement for a plan providing for distribution of any
securities of the bridge company if such information is
necessary to prepare such disclosure statement;
``(3) that for as long as the equity securities of the
bridge company are held by the trust, the special trustee
shall file a notice with the court in connection with--
``(A) any change in a director or senior officer of the
bridge company;
``(B) any modification to the governing documents of the
bridge company; or
``(C) any material corporate action of the bridge company,
including--
``(i) recapitalization;
``(ii) a material borrowing;
``(iii) termination of an intercompany debt or guarantee;
``(iv) a transfer of a substantial portion of the assets of
the bridge company; or
``(v) the issuance or sale of any securities of the bridge
company;
``(4) that any sale of any equity securities of the bridge
company shall not be consummated until the special trustee
consults with the Federal Deposit Insurance Corporation and
the Board regarding such sale and discloses the results of
such consultation with the court;
``(5) that, subject to reserves for payments permitted
under paragraph (1) provided for in the trust agreement, the
proceeds of the sale of any equity securities of the bridge
company by the special trustee be held in trust for the
benefit of or transferred to the estate;
``(6) the process and guidelines for the replacement of the
special trustee; and
``(7) that the property held in trust by the special
trustee is subject to distribution in accordance with
subsection (c).
``(c) Distribution of Assets Held in Trust.--
``(1) In general.--The special trustee shall distribute the
assets held in trust--
``(A) if the court confirms a plan in the case, in
accordance with the plan on the effective date of the plan;
or
``(B) if the case is converted to a case under chapter 7
under section 1410.
``(2) Termination.--As soon as practicable after a final
distribution under paragraph (1), the office of the special
trustee shall terminate, except as may be necessary to wind
up and conclude the business and financial affairs of the
trust.
``(d) Applicability.--After a transfer to the special
trustee under this section, the special trustee shall be
subject only to applicable nonbankruptcy law, and the actions
and conduct of the special trustee shall no longer be subject
to approval by the court in the case under this chapter.
``Sec. 1407. Automatic stay; assumption
``(a) Automatic Stay.--
``(1) In general.--A petition filed under section 1403
operates as a stay, applicable to all entities, of the
acceleration, termination, or modification of any debt,
contract, lease, or agreement of the kind described in
paragraph (2), or of any right or obligation under any such
debt, contract, lease, or agreement, solely because of--
``(A) a default by the debtor under any such debt,
contract, lease, or agreement; or
``(B) a provision in such debt, contract, lease, or
agreement, or in applicable nonbankruptcy law, that is
conditioned on--
``(i) the insolvency or financial condition of the debtor
at any time before the closing of the case;
``(ii) the commencement of a case under this title
concerning the debtor;
``(iii) the appointment of or taking possession by a
trustee in a case under this title concerning the debtor or
by a custodian before the commencement of the case; or
``(iv) a credit rating agency rating, or absence or
withdrawal of a credit rating agency rating of--
``(I) the debtor at any time after the commencement of the
case;
``(II) an affiliate during the 48 hours after the
commencement of the case;
``(III) the bridge company while the trustee or the special
trustee is a direct or indirect beneficial holder of more
than 50 percent of the equity securities of--
``(aa) the bridge company; or
``(bb) an affiliate, if all of the direct or indirect
interests in the affiliate that are property of the estate
are transferred under section 1406; or
``(IV) an affiliate while the trustee or the special
trustee is a direct or indirect beneficial holder of more
than 50 percent of the equity securities of--
``(aa) the bridge company; or
``(bb) the affiliate, if all of the direct or indirect
interests in the affiliate that are property of the estate
are transferred under section 1405.
``(2) Debt, contract, lease, or agreement.--A debt,
contract, lease, or agreement described in this paragraph--
``(A) is--
``(i) any debt, executory contract, or unexpired lease of
the debtor;
``(ii) any agreement under which the debtor issued or is
obligated for debt;
``(iii) any debt, executory contract, or unexpired lease of
an affiliate; and
``(iv) any agreement under which an affiliate issued or is
obligated for debt; and
``(B) does not include capital structure debt or qualified
financial contracts.
``(3) Termination of stay.--A stay under this subsection
terminates--
``(A) as to the debtor, upon the earliest of--
``(i) 48 hours after the commencement of the case;
``(ii) assumption of the debt, contract, lease, or
agreement by the bridge company under an order authorizing a
transfer under section 1405;
``(iii) a final order of the court denying the request for
a transfer of the debt, contract, lease, or agreement under
section 1405; or
``(iv) the time the case is dismissed; and
``(B) as to an affiliate, upon the earliest of--
``(i) 48 hours after the commencement of the case, if the
court has not ordered a transfer under section 1405;
``(ii) the entry of an order authorizing a transfer under
section 1405 in which the direct or indirect interests in the
affiliate that are property of the estate are not transferred
under section 1405;
``(iii) a final order of the court denying the request for
a transfer under section 1405; or
``(iv) the time the case is dismissed.
``(4) Applicability.--Sections (d), (e), (f), and (g) of
section 362 apply to a stay under this subsection.
``(b) Assumption by Bridge Company.--A debt, executory
contract, unexpired lease of the debtor, or any other
agreement described in subsection (a)(2), may be assumed by a
bridge company in a transfer under section 1405
notwithstanding any provision in an agreement or in
applicable nonbankruptcy law that--
``(1) prohibits, restricts, or conditions the assignment of
the debt, contract, lease, or agreement; or
``(2) accelerates, terminates, or modifies, or permits a
party other than the debtor to accelerate, terminate, or
modify, the debt, contract, lease, or agreement on account
of--
``(A) the assignment of the debt, contract, lease, or
agreement; or
``(B) a change in control of any party to the debt,
contract, lease, or agreement.
``(c) No Acceleration, Termination, or Modification of
Agreements of Debtor.--
``(1) In general.--A debt, contract, lease, or agreement of
the kind described in subsection (a)(2) may not be
accelerated, terminated, or modified, and any right or
obligation under such debt, contract, lease, or agreement may
not be accelerated, terminated, or modified, as to the bridge
company solely because of a provision in the debt, contract,
lease, or agreement or in applicable nonbankruptcy law--
``(A) of the kind described in subsection (a)(1)(B) as
applied to the debtor;
``(B) that prohibits, restricts, or conditions the
assignment of the debt, contract, lease, or agreement; or
``(C) that accelerates, terminates, or modifies, or permits
a party other than the debtor to accelerate, terminate, or
modify, the debt, contract, lease or agreement, on account
of--
``(i) the assignment of the debt, contract, lease, or
agreement; or
``(ii) a change in control of any party to the debt,
contract, lease, or agreement.
``(2) Default.--If there has been a default by the debtor
under a provision other than the kind described in paragraph
(1) in a debt, contract, lease, or agreement of the kind
described in subsection (a)(2), the bridge company may assume
such debt, contract, lease, or agreement only if the bridge
company--
``(A) cures, or provides adequate assurance in connection
with a transfer under section 1405 that the bridge company
will promptly cure, the default;
``(B) compensates, or provides adequate assurance in
connection with a transfer under section 1405 that the bridge
company will
[[Page S5467]]
promptly compensate, a party other than the debtor to the
debt, contract, lease, or agreement, for any actual pecuniary
loss to the party resulting from the default; and
``(C) provides adequate assurance in connection with a
transfer under section 1405 of future performance under the
debt, contract, lease, or agreement, as determined by the
court under section 1405(c)(4).
``Sec. 1408. Treatment of qualified financial contracts and
affiliate contracts
``(a) In General.--Notwithstanding sections 362(b)(6),
362(b)(7), 362(b)(17), 362(b)(27), 362(o), 555, 556, 559,
560, and 561, a petition filed under section 1403 operates as
a stay, during the period specified in section 1407(a)(3)(A),
applicable to all entities, of the exercise of a contractual
right--
``(1) to cause the acceleration, termination, modification,
or liquidation of a qualified financial contract of the
debtor or an affiliate;
``(2) to offset or net out any termination value, payment
amount, or other transfer obligation arising under or in
connection with a qualified financial contract of the debtor
or an affiliate; or
``(3) under any security agreement or arrangement or other
credit enhancement forming a part of or related to a
qualified financial contract of the debtor or an affiliate.
``(b) Payment and Delivery Obligations.--
``(1) In general.--During the period specified in section
1407(a)(3)(A), the trustee or the affiliate shall perform all
payment and delivery obligations under a qualified financial
contract of the debtor or the affiliate, as the case may be,
that become due after the commencement of the case. The stay
provided under subsection (a) terminates as to a qualified
financial contract of the debtor or an affiliate immediately
upon the failure of the trustee or the affiliate, as the case
may be, to perform any such obligation during such period.
``(2) Failure to perform.--Any failure by a counterparty to
any qualified financial contract of the debtor or any
affiliate to perform any payment or delivery obligation under
such qualified financial contract, including during the
pendency of the stay provided under subsection (a), shall
constitute a breach of such qualified financial contract by
the counterparty.
``(c) Assignment or Assumption.--Notwithstanding any
provision of subsection 1407(b) or applicable nonbankruptcy
law, subject to the court's approval, a qualified financial
contract between an entity and the debtor may be assigned to
or assumed by the bridge company in a transfer under section
1405 only if--
``(1) all qualified financial contracts between the entity
and the debtor are assigned to and assumed by the bridge
company in the transfer under section 1405;
``(2) all claims of the entity against the debtor under any
qualified financial contract between the entity and the
debtor (other than any claim that, under the terms of the
qualified financial contract, is subordinated to the claims
of general unsecured creditors) are assigned to and assumed
by the bridge company;
``(3) all claims of the debtor against the entity under any
qualified financial contract between the entity and the
debtor are assigned to and assumed by the bridge company; and
``(4) all property securing or any other credit enhancement
furnished by the debtor for any qualified financial contract
described in paragraph (1) or any claim described in
paragraph (2) or (3) under any qualified financial contract
between the entity and the debtor is assigned to and assumed
by the bridge company.
``(d) No Acceleration, Termination, or Modification of
Qualified Financial Contracts.--Notwithstanding any provision
of a qualified financial contract or of applicable
nonbankruptcy law, a qualified financial contract of the
debtor that is assumed by or assigned to the bridge company
in a transfer under section 1405 may not be accelerated,
terminated, modified, or liquidated after the entry of the
order approving a transfer under section 1405, and any right
or obligation under the qualified financial contract may not
be accelerated, terminated, or modified, after the entry of
the order approving a transfer under section 1405 solely
because of a provision of the kind described in section
1407(c)(1), other than a provision of the kind described in
section 1407(b) that occurs after property of the estate no
longer includes a direct beneficial interest or an indirect
beneficial interest through the special trustee, in more than
50 percent of the equity securities of the bridge company.
``(e) No Acceleration, Termination, Modification, or
Liquidation of Agreements of Affiliates.--Notwithstanding any
provision in any agreement or in applicable nonbankruptcy
law, an agreement (including an executory contract, unexpired
lease, qualified financial contract, or an agreement under
which the affiliate issued or is obligated for debt) of an
affiliate that is assumed by or assigned to the bridge
company in a transfer under section 1405, and any right or
obligation under such agreement, may not be accelerated,
terminated, modified, or liquidated after the entry of the
order approving a transfer under section 1405 solely because
of a provision of the kind described in section 1407(c)(1),
other than a provision of the kind described in section
1407(b) that occurs after the bridge company is no longer a
direct or indirect beneficial holder of more than 50 percent
of the equity securities of the affiliate at any time after
the commencement of the case if--
``(1) all direct or indirect interests in the affiliate
that are property of the estate are transferred under section
1405 to the bridge company within the period specified in
subsection (a);
``(2) the bridge company assumes--
``(A) any guarantee or other credit enhancement issued by
the debtor relating to the agreement of the affiliate; and
``(B) any right of setoff, netting arrangement, or debt of
the debtor that directly arises out of or directly relates to
the guarantee or credit enhancement; and
``(3) any property of the estate that directly serves as
collateral for the guarantee or credit enhancement is
transferred to the bridge company.
``Sec. 1409. Licenses, permits, and registrations
``(a) In General.--Notwithstanding any otherwise applicable
nonbankruptcy law, if a request is made under section 1405
for a transfer of property of the estate, any Federal, State,
or local license, permit, or registration that the debtor or
an affiliate had immediately before the commencement of the
case and that is proposed to be transferred under section
1405 may not be accelerated, terminated, or modified at any
time after the request solely on account of--
``(1) the insolvency or financial condition of the debtor
at any time before the closing of the case;
``(2) the commencement of a case under this title
concerning the debtor;
``(3) the appointment of or taking possession by a trustee
in a case under this title concerning the debtor or by a
custodian before the commencement of the case; or
``(4) a transfer under section 1405.
``(b) Validity of Certain Licenses, Permits, and
Registrations.--Notwithstanding any otherwise applicable
nonbankruptcy law, any Federal, State, or local license,
permit, or registration that the debtor had immediately
before the commencement of the case that is included in a
transfer under section 1405 shall be valid and all rights and
obligations thereunder shall vest in the bridge company.
``Sec. 1410. Conversion to chapter 7
``Notwithstanding section 109(b), a court may convert a
case under this chapter to a case under chapter 7 if--
``(1) a transfer described in section 1405 has taken place;
``(2) the court has ordered the appointment of a special
trustee under section 1406; and
``(3) the court finds, after providing notice and
conducting a hearing, that the conversion of the case is in
the best interests of the creditors and the estate.
``Sec. 1411. Exemption from securities laws
``For purposes of section 1145, a security of the bridge
company shall be deemed to be a security of a successor to
the debtor under a plan if the court approves the disclosure
statement for the plan as providing adequate information (as
defined in section 1125(a)) about the bridge company and the
security.
``Sec. 1412. Inapplicability of certain avoiding powers
``A transfer made or an obligation incurred by the debtor
to an affiliate prior to or after the commencement of the
case, including any obligation released by the debtor or the
estate to or for the benefit of an affiliate, in
contemplation of or in connection with a transfer under
section 1405, is not avoidable under section 544, 547,
548(a)(1)(B), or 549, or under any similar nonbankruptcy law.
``Sec. 1413. Consideration of financial stability
``The court may consider the effect that any decision in
connection with this chapter may have on financial stability
in the United States.''.
(b) Technical and Conforming Amendment.--The table of
chapters for title 11, United States Code, is amended by
inserting after the item relating to chapter 13 the
following:
``14. Liquidation, reorganization, or recapitalization of a covered
financial corporation..................................1401.''.....
SEC. 4. AMENDMENTS TO TITLE 28, UNITED STATES CODE.
(a) Amendment to Chapter 13.--Chapter 13 of title 28,
United States Code, is amended by adding at the end the
following:
``Sec. 298. Judge for a case under chapter 14 of title 11
``(a) Notwithstanding section 295, the Chief Justice of the
United States shall designate not fewer than 10 bankruptcy
judges to be available to hear a case under chapter 14 of
title 11. Bankruptcy judges may request to be considered by
the Chief Justice of the United States for such designation.
``(b)(1) Notwithstanding section 155, a case under chapter
14 of title 11 shall be heard under section 157 by a
bankruptcy judge designated under subsection (a), who shall
be assigned to hear such case by the chief judge of the court
of appeals for the circuit embracing the district in which
the case is pending.
``(2) If the bankruptcy judge assigned to hear a case under
paragraph (1) is not assigned to the district in which the
case is pending, the bankruptcy judge shall be temporarily
assigned to the district. To the greatest extent practicable,
the approvals required under section 155(a) shall be
obtained.
``(c) A case under chapter 14 of title 11, and all
proceedings in the case, shall take place in the district in
which the case is pending.''.
(b) Amendment to Section 1334.--Section 1334 of title 28,
United States Code, is amended by adding at the end the
following:
[[Page S5468]]
``(f) This section does not grant jurisdiction to the
district court after a transfer pursuant to an order under
section 1405 of title 11 of any proceeding related to a
special trustee appointed, or to a bridge company formed to
accomplish a transfer, under section 1405 of title 11.''.
(c) Technical and Conforming Amendment.--The table of
sections for chapter 13 of title 28, United States Code, is
amended by adding at the end the following:
``298. Judge for a case under chapter 14 of title 11.''.
SEC. 5. LIMITATION ON USE OF FEDERAL FUNDS.
Notwithstanding any other provision of law, no funds
appropriated to the Federal Government may be paid to a
covered financial corporation (as defined in section 101(9A)
of title 11, United States Code, as amended by section 2(a)
of this Act), or to a creditor of any covered financial
corporation, to satisfy a claim in a case under chapter 14 of
title 11, United States Code.
____________________