"Cutting edge infrastructure: economies of scale facilitate extensive data warehousing, access to more asset classes and markets, auto-substitution, auto-allocation & optimization technology, same day reporting.
"Introduction to new counterparts: A Global Collateral Clearing House."
Panic swept across the entire repo market.
No securities were considered safe enough for repos except US treasuries.
Fundings in the repo market grind to a halt.
Market players withdrew funds and began hoarding treasuries.
The rest who own structured products were slaughtered.
I would like to quote Gary Gorton again:
"Imagine a firm that is levered 30:1, by borrowing in the repo market. If the haircut [5] doubles, or goes from zero to a positive amount, the required deleveraging is massive! Most investment banks were levered 30:1, equivalent to about a 3 per cent haircut. If the haircut rises to 6 per cent, at least half the assets will have to be sold.
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