Republicans have taken some warranted criticism this year for offering alternatives to Obama’s proposals that lacked detail or simply repackaged old ideas. The regulatory-reform plan drawn up by Republicans on the House Financial Services Committee shouldn’t be tarred with the same brush. The ideas offered are innovative and specific to the enormous problems posed by the bailouts, the runaway Fed and the failure of the GSEs. It is well worth reading — or, if you’re short on time, read a condensed version here.

The key to the GOP plan is how it would address the problem of “too big to fail.” Both parties are grappling with this problem, but the administration’s approach leaves much to be desired. Geithner and Summers sold the administration’s plan as a receivership authority that would allow the government to manage the failure of large firms. The white paper, however, revealed a number of disturbing details: The administration’s plan would preserve the Treasury’s authority to make stock and asset purchases, loans and loan guarantees, and/or appoint conservators to stabilize tottering giants. Treasury would almost certainly avail itself of these “soft” options first, as it did with Fannie, Freddie, and virtually every large bank except for Lehman.

The GOP plan would foreclose the bailout options and focus only on managing the failure of troubled firms. Instead of a receivership authority, it proposes a new chapter of the bankruptcy code to deal with financial giants:

The relatively smooth bankruptcies of Drexel Burnham Lambert, Enron, and WorldCom demonstrate that the bankruptcy system is more than capable of resolving and liquidating large, complex institutions. The failure of Lehman Brothers last September is often cited by proponents of a new systemic risk resolution authority as an example of why bankruptcy “won’t work.” In truth, the shock to the markets from Lehman’s collapse was the result of dashed expectations of market participants that the government would ride to Lehman’s rescue just as it had in the earlier Bear Stearns and GSE episodes, not of any inadequacies in the bankruptcy process. Nevertheless, Republicans believe that bankruptcy can be made more efficient and better tailored to resolving large non-bank financial institutions. Republicans are therefore proposing a new chapter to the Bankruptcy Code to deal with the unique characteristics of financial institutions that will make “orderly failure” a practical solution for resolving troubled firms. Among other things, this new chapter will provide for better coordination between the regulators of these institutions and the bankruptcy system, so that regulators can provide technical assistance and specialized expertise about financial institutions. In addition, this new chapter will give bankruptcy judges the power to stay claims by creditors and counterparties to prevent runs on troubled institutions, thereby helping to alleviate the panic that could strike the financial system if a large institution finds itself facing difficulties.

Tim Geithner’s testimony before the committee, which was scheduled for today, was postponed and will be rescheduled. Stay tuned — it will be interesting to hear him articulate why this plan wouldn’t work just as well as, if not better than, the bailout authority he is asking for.