Category Archives: Bankruptcy treatment

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Salmon: Give those repo lenders skin in the game

Reuters columnist Felix Salmon likes the Miller-Moore amendment, which would cause repo lenders to lose up to 20 percent of their collateral when the bank they’ve made the loan to fails. From one of two columns on November 20: This … Continue reading

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2005 Bankruptcy Act increases systemic risk

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When a repo borrower files bankruptcy, the repo lender has no worries. His collateral is exempt from the bankruptcy, thanks to a 1984 law that said bankrupt borrowers must immediately repay their repo loans in full. The purpose of the … Continue reading

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FDIC remarks about repos are “really, really important”

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FDIC chairman Sheila Bair recently said secured lenders should have to carry more of the cost of bank failures. Joseph Mason, banking professor at Louisiana State University, saw that news reported by Bloomberg October 5, 2009, and he doesn’t think … Continue reading

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Bankruptcy protection backfired, critics claim

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A change in the U.S. bankruptcy code in 2005, intended to insulate financial institutions from systemic risk, instead hastened the demise of Bear Stearns, Lehman Brothers and American International Group, some experts told the Financial Times. Industry trade associations defended … Continue reading

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Too risky for bankruptcy is too risky to do

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In the midst of financial turmoil on Wall Street, some experts are pointing to bankruptcy laws as one reason for the crisis. Here’s their concern: Several financial assets including repurchase agreements are exempted from bankruptcy control. This means, for example, … Continue reading