Financial Reform = No More Derivative Special Treatment in Bankruptcy?

Thomas Jackson and David Skeel have written an interesting piece in the Wall Street Journal proposing that true financial reform might be as simple as getting rid of the special treatment that derivatives are given in Bankruptcy. Derivatives are truly given special treatment in the bankruptcy code. In fact, in a recent article in the California Bankruptcy Journal, Michael Weiss suggested a way to make bankruptcy proof loans using derivatives.

This is an interesting concept and should be investigated. Unfortunately, I doubt Congress will be have the foresight, or should I say, the lack of political motivation, to examine this issue closely.

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