WASHINGTON ( TheStreet) - The Federal Deposit Insurance Corp. on Tuesday proposed rules to implement its authority to liquidate financial companies considered "to big to fail" under the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama last July.

The new proposed rule helps to "define how compensation may be clawed back from senior executives and directors responsible for the failure of the covered financial company." The FDIC said that in response to comments, it was making an effort to "harmonize" the liquidation rules with the U.D. Bankruptcy code.

The new rule proposal also addresses "broader issues that define the rights of creditors" of companies in FDIC receivership, clarifying the order of payment for creditors, defining terms such as "administrative expenses" and "amounts owed to the United States," and the creation and handling of claims on "bridge companies" created in the wake of a failure, for an orderly wind-down of assets.

Part of the FDIC's "orderly liquidation authority" mandate under Dodd-Frank is that the agency "as receiver may recover from senior executives and directors who were substantially responsible for the failed condition of a covered financial company any compensation that they received during the two-year period preceding the date on which the FDIC was appointed as receiver."

In cases of fraud, the two-year limit wouldn't apply. The rule proposal went into some detail on how the agency would determine an executive's level of responsibility for a large financial institution's failure.

The new rules - subject to a 60-day comment period - continues the FDIC's efforts to "develop the framework" for orderly liquidation of large financial companies that was started in October.

That proposal lead to an "interim final rule" in January, that addressed the payment of claims by creditors, contracted parties and shareholders of failing financial institutions, and the limitations of liens on the FDIC.

Thorough Bank Failure Coverage

TheStreet has provided detailed coverage of every bank failure since the current wave of closures began in 2008. The largest failure during the current crisis, and by far the largest in United States history, was Washington Mutual, which was shuttered by the Office of Thrift Supervision in September 1998 and sold by the FDIC to JPMorgan Chase ( JPM).

Please click here for coverage of last Friday's two bank failures.

All previous bank and thrift closures since the beginning of 2008 are detailed in TheStreet's interactive bank failure map:

The bank failure map is color-coded, with the states having the greatest number of failures highlighted in dark gray, and states with no failures in light green. By moving your mouse over a state you can see its combined 2008-2011 totals. Then click the state to open a detailed map pinpointing the locations and providing additional information for each bank failure.

--Written by Philip van Doorn in Jupiter, Fla.

>To contact the writer of this article, click here: Philip van Doorn.

>To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

>To submit a news tip, send an email to: tips@thestreet.com.
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

If you liked this article you might like

Citigroup Gives CEO Corbat 48% Pay Raise as Profitability Misses Goal

Citigroup Gives CEO Corbat 48% Pay Raise as Profitability Misses Goal

Worst-In-Class Goldman Sachs CEO Blankfein Gets 9% Pay Raise

Worst-In-Class Goldman Sachs CEO Blankfein Gets 9% Pay Raise

Here's One Hint That S&P 500 Stocks Are a Screaming Buy

Here's One Hint That S&P 500 Stocks Are a Screaming Buy

Bitcoin Today: Prices Rally Ahead of Chinese New Year, Moody's Weighs in on Risk

Bitcoin Today: Prices Rally Ahead of Chinese New Year, Moody's Weighs in on Risk

Federal Reserve Who? Stocks Have Historically Done Great With Rising Rates

Federal Reserve Who? Stocks Have Historically Done Great With Rising Rates