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Repo Fire-Sale Plan Within Reach

After Fed sounds alarm about risk of future asset fire sales like those at Lehman Brothers and Bear Stearns, industry groups hatch plans to guarantee most-liquid collateral used for repos.

By Liz Capo McCormick, Bloomberg | Updated on March 11, 2014

Wall Street’s biggest firms are close to agreeing on a plan that would safeguard the financial markets from the crippling fire sales that engulfed Lehman Brothers Holdings Inc. and Bear Stearns Cos.

By doing so, the participants seek to reach a solution to what the Federal Reserve sees as the last systemic risk in the $1.6 trillion-a-day market for short-term funding yet to be addressed: The potential for questions over a bond dealer’s liquidity to unleash a wholesale dumping of assets that causes a crisis of confidence in the financial system.

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