Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Thursday, April 3, 2008

SEC's Cox Testifies on Bear Stearns Collapse

Here is Chair Cox's Testimony Concerning Recent Events in the Credit Markets Before the U.S. Senate Committee on Banking, Housing and Urban Affairs on April 3, 2008, where he noted that

for the first time, a major investment bank that was well-capitalized and apparently fully liquid experienced a crisis of confidence that denied it not only unsecured financing, but short-term secured financing, even when the collateral consisted of agency securities with a market value in excess of the funds to be borrowed.

In addition,

But what neither the CSE regulatory approach nor any existing regulatory model has taken into account is the possibility that secured funding, even that backed by high-quality collateral such as U.S. Treasury and agency securities, could become unavailable. The existing models for both commercial and investment banks are premised on the expectancy that secured funding, albeit perhaps on less favorable terms than normal, would be available in any market environment.

http://lawprofessors.typepad.com/securities/2008/04/secs-cox-testif.html

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