Treasury Official Says Congress Should Pass Netting Laws This Year

The American Bankruptcy Institute reports that a senior Treasury official said that Congress should pass netting legislation, even if it fails to pass broad-based bankruptcy reform legislation. "Whether as part of comprehensive bankruptcy reform legislation or as a stand-alone bill, we believe that Congress should enact netting legislation this year. Further delays would unnecessarily place the financial system at greater risk," said Sheila Bair, assistant secretary for financial institutions.

Bair, speaking to an American Bar Association committee, stated  that there was an urgent need for the legislation. The law  would make it sipler and clearer for counterparties to settle financial contracts if one of the parties becomes insolvent.
"The relevant provisions are a non-controversial portion of broader legislation to revise the bankruptcy laws," she said. "We are concerned, however, that the controversial issues of the broader leg! islation may not be resolved soon enough to allow its passage this year."  Bair commented that the changes would minimize market disruptions in the event of insolvency and also reduce the risks to federally regulated participants and to the overall financial system.