Texas Haircut (financial term)

A “haircut” is a financial term meaning that one side is getting “shaved.” For example, a debtor cannot repay a loan and offers fifty cents on each dollar owed to satisfy the debt. The person or institution that gave the loan is taking a “haircut.”
 
“Texas haircut” is rarely used. It probably was used some time in the 1980s, when the savings and loan scandals occurred. “Texas haircut” might have some currency today in Houston or perhaps Dallas.
 
 
Double-Tongued Word Wrester
take a haircut v. phr. (in finance) to accept a valuation or return that is less than optimal, especially to partially forgive a debt.
Citations:
1970 Terry Robards New York Times (Aug. 16) “On Wall Street, Some Fail, All Worry” p. 3-6: When securities are used, the brokerage firm take a “haircut” on their value. This means that, for capital purposes, they are valued at somewhat less than their market prices. How much less is up to the stock exchange.
1982 N.R. Kleinfield @ Valley Stream, Long Island New York Times (June 30) “Living A Corporate Nightmare”: The intent of such sessions is to identify what creditors will settle for. “But there was no goal seeking,…other than that everyone wanted 100 cents on the dollar. I think that nobody wanted to accept their fate, which was that everybody had to take a haircut.”
2000 Jerry Knight Washington Post (Nov. 20) “Evaluating FBR’s Earnings: ‘Haircut’ or a Close Shave?” p. E01: To account for the fact that the shares cannot be sold, FBR uses an accounting technique known as a “liquidity discount,” or, in the jargon of Wall Street, “taking a haircut.” Back to your house, the one with the value that increased to $300,000 from $200,000. If you decide to take out a home equity loan to pay your child’s college tuition, most lenders won’t let you borrow the full $100,000 increase in value. They’ll lend you only 80 percent of the value, which means taking a haircut of 20 percent.   
 
Google Books
Condition of the Federal Deposit Insurance Funds: Hearings Before the Committee on Banking…
By United States Congress. House. Committee on Banking, Finance, and Urban Affairs, Federal Deposit Insurance Corporation
Washington, D.C.: Congressional Sales Office
1988
Pg. 4:
The $2.7 billion of non-performing loans implies a hit against capital of something in excess of $1 billion, given the usual Texas haircut of 40-50 percent for non-performing loans.
   
Questia Online Library
Bankers in New England and elsewhere speak of having been given a “Texas haircut”—a wry reference to downgrading loans which brings painful consequences.
 
Asia Week (June 11, 1999)
The creditors’ adviser, PricewaterhouseCoopers, says the bailout proposal could mean a haircut - banker-speak for a write-down - of 27 cents to 41 cents on the dollar for its clients.