Is Bankruptcy Legislation For Big Banks Gaining Steam?

Changes to the U.S. bankruptcy code to make the bankruptcy of big banks more feasible is "gaining steam" on Capitol Hill.

According to the Wall Street Journal, changes to the bankruptcy code were included in a financial-services budget bill the U.S. House of Representatives passed on Thursday.

The Financial Institutions Bankruptcy Act is intended to avoid another Lehman Brothers-style collapse, when the bank's bankruptcy filing resulted in widespread panic that signaled the beginning of the financial crisis.

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The Wall Street Journal noted that the bill would provide regulators and bankruptcy judges with more authority and flexibility to sort out the liabilities of a financial firm that is failing and to stabilize continuing operations.

The bill has been passed by the House Judiciary Committee unanimously and also passed by the House by voice vote. It is now more likely to clear Congress later this year and become law.

The Wall Street Journal quoted a spokesman for the bill's primary sponsor, Rep. David Trott (R-Michigan) as saying he "believes the inclusion of the language in the appropriations bill further builds momentum for this bipartisan plan to protect taxpayers."