A federal district court has ruled that a distressed debt fund is not a “financial institution” for purposes of the assignment provisions of a loan agreement.

Background

Yesterday, FDIC Chairman Sheila Bair, the keynote speaker at the Institute of International Bankers Cross-Border Insolvency Issues Conference in New York, stressed the need to end the “too big to fail” mentality by “eliminating the belief that the government will always support large, interconnected financial firms.” Chairman Bair noted that in order to do so, “we need an effective mechanism to close large, financial intermediaries when they get into trouble.”