For similar reasons, many investors in money market mutual funds withdrew all their funds when the redemption value exceeded the value of holding the fund. In contrast, in the case of repo lending, lenders have the alternative to withdrawal of varying the haircut they demand.
There is a close analogy to the discounting of bank notes during the U.S. free banking era, as discussed by Gorton (see Gary Gorton (1996), "Reputation Formation in Early Bank Note Markets," Journal of Political Economy, vol. 104 (April), pp. 346-97).