I'm continuing my series about Fact and Fiction on Wall St Reform as produced by The Whitehouse. The Lindsey Memo is an anti-reform talking points memo written by Larry Lindsey, a former Bush appointee and a former Enron consultant.

FICTION:

Lindsey Memo: "The bill allows a 2/3 vote of the Financial Stability Oversight Council to deem any firm (financial or non-financial) as coming under its rubric and then authorizes the FDIC and Treasury Secretary to treat each of the firm's shareholders and creditors as they choose, without regard to bankruptcy law."

FACT:

Wrong on all the facts. First, only large financial firms whose failure could pose a serious threat to the U.S. economy would be subject to the bill's enhanced bankruptcy-like process. Second, similar to a standard bankruptcy, creditors' rights will be respected in accordance with their statutory priorities. But make no mistake, under the bill, failed financial firms will be sold off, broken apart, or otherwise liquidated; culpable management will be fired, creditors will be allowed to suffer losses, and shareholders will be wiped out. This is no bailout.