[Congressional Record Volume 161, Number 115 (Wednesday, July 22, 2015)]
[Senate]
[Pages S5464-S5468]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      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.

                          ____________________