Full story here from Henry CK Liu via AsiaTimes.
“On December 2, 2009, the US House Financial Services Committee approved a bill to regulate systemic risk in financial markets which, aside from proposing a new systemic regulator, includes a little-noticed proposal that when any large bank fails in the future, it should be placed into a resolution regime, with creditors losing up to 20% of the value of the debt.
While haircuts are normally part of any restructuring, haircuts have never been applied to the repo (or repurchase) market, where banks raise short-term funds by lending out assets. The new rule would destroy the repo market as a low-cost source of borrowed funds. “The implications will be horrendous … doing this would be madness,” the Financial Times quoted what it said was the head of one large bank as saying. (more…)