Uncertainty Can Carry a High Price; With Dodd-Frank enacted, market players puzzle over how to deal with a company that's placed in FDIC receivership

Congress enacted the Dodd-Frank Wall Street Reform Act to provide federal officials with broad power to seize and resolve nonbank financial companies in response to concerns about the future ability of the federal government to respond to serious systemic financial distress. In Title II of the law, the Treasury secretary is authorized to place a covered financial company, or CFC, into a receivership administered by the Federal Deposit Insurance Corp. The fundamental impact of Title II is that a firm and its investors and lenders have no assurance that at some point it may not be placed in receivership under the FDIC rather than in a bankruptcy proceeding. That is creating a level of uncertainty in the markets that is itself destabilizing.