Abstract: Explains that favorable treatment of derivatives and financial repurchase agreements under bankruptcy law weakens market discipline during ordinary financial times and exacerbates financial failure during an economic downturn or financial crisis. Safe harbors for such instruments facilitate collateral runs and fire sales and encourage short-term financing, which benefit from such privilege. The purpose of the special treatment, containment of contagion, is not accomplished and the resulting risk is to inefficiently burden other creditors including the United States government, which serves as de jure or de facto guarantor of significant financial institutions.