Changing Bankruptcy Laws for Banks

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Today, Congress is going to pass quietly behind the scenes changes to the BANKRUPTCY LAWS illustrating the growing fear that we are going to see a sharp economic decline ahead. The proposed new law would eliminate protections for certain financial contracts that made big bank bankruptcies nearly impossible in the past. Under the current law, if a financial institution files for bankruptcy protection, counterparties can cancel their contracts. That includes derivatives and repurchase agreements. Creditors can actually seize the assets a firm needs to survive.

Consequently, under this new bill, creditors wouldn’t be able to cancel their contracts during the 48-hour transfer process. The banks are cheering this. No wonder. They can be merged and nobody can cancel anything or seize their assets. More and more it looks like those in government understand there are dark clouds on the horizon.