And he needs to make sure that any American bank that was involved in loans to Asia, and now wants to share in the I.M.F. bailout, takes a haircut. And I'm not just talking about a trim.

Its president, Nestor Kirchner, was expected to confirm overnight that about 75% of the country's bondholders had agreed to swap their old debt for new at a loss of up to 70 cents in the dollar—also a record and one that Mr Kirchner has called “the biggest haircut in history” for investors.

Something similar was happening at the same time in Greece. In the spring of 2012 Greece's public debt did, eventually, take a haircut, confirming that an unpayable debt will receive a haircut whatever the dogmas of European officials.

Government securities having high credit rating such as Treasury bonds and Treasury bills are usually subjected to 1% to 10% haircut, while for more risky, volatile or illiquid securities, such as a stock option, the haircut might be as high as 30%.

But whereas in the past it has been possible for a brokerage house to credit a customer’s account for 100 percent of the value of a commodity, we have required that that value be haircutted significantly.

That is because the future stream of income is discounted to present value at perhaps as much as two to three percentage points above the prime rate and then haircutted by as high as 33½%.

The CFTC also permits FCMs to accept non-cash, non-security assets, but these must be "haircutted"--to 80 percent of their value.

The ratio of these two numbers represents the ratio by which column one, the gross profits, needs to be "haircutted," to amortize an asset initially established at 17%, with 6% interest starting out at the same place and ending at the same place over the same period of time.

DCC Credit Rating of First Priority CE Provider or Counterparty; or Cash/Cash Equivalent (which is not Haircutted)

The collateral value would then be haircutted by 140 percent, 40 EUR/140 percent= 28.6 EUR.

And we do take a lot of care in our discount window lending and our other lending to make sure that the collateral that we give is appropriately haircutted and the Federal Reserve is well-protected.

Effectively a statement was made that ‘you are going to have to find the money for the banks yourselves. That meant a decision was taken that a deposit would be haircutted.’

never ask the barber if you need a haircut

Haircut

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