The financial reform legislation the House Financial Services Committee is considering contains a provision that would impose a haircut on secured lenders to a large financial institution that ends up in a FDIC receivership. This provision, introduced by Reps. Brad Miller, D-N.C., and Dennis Moore, D-Kan., apparently enjoys the support of FDIC Chairman Sheila Bair and has come to be called the Bair-Miller-Moore provision.

It is easy to understand the FDIC's concern. Secured lenders would be able to grab their collateral and thus remove the choicest assets from the insolvent institution, before the FDIC's could take control over those assets.

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