Wall Street unwittingly created one of the catalysts for the collapse of Bear Stearns, Lehman and AIG by backing new bankruptcy rules, lawyers and bankers say. The 2005 changes made clear that certain derivatives and financial transactions were exempt from provisions in the bankruptcy code that freeze a failed company’s assets until a court decides how to apportion them among creditors. But, the new rules might have accelerated the collapses by removing legal obstacles for banks and hedge funds that wanted to close positions and demand extra collateral from the three companies.
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