STOCK MARKET WATCH, Monday, December 19, 2011.

[Ghost Dog]

112. Here's the crux of it, I think:

What was this amendment? The amendment exempted repos (and hypothecated and re-hypothecated assets) and a whole range of derivatives from the automatic stay. It also allowed lower quality assets to qualify for the exemptions.

Which means,

"The special bankruptcy treatment given repos and derivatives means that repo lenders and parties to derivative contracts can keep the collateral if their trading partner becomes insolvent. This exempts them from the “automatic stay” rule in bankruptcy, which prohibits most creditors from trying to collect ahead of others."

Or as the official report from the US Financial Crisis Inquirey Commission said,

"under a 2005 amendment to the bankruptcy laws, derivatives counterparties were given the advantage over other creditors of being able to immediately terminate their contracts and seize collateral at the time of bankruptcy. (p. 48)"

So when a bank goes bankrupt, BEFORE even the most senior bond holders, the repo lenders and derivatives traders can remove, or keep all the assets pledged to them.

I'd say your conclusion is probably correct.