This is false if you're talking about the 200-4R or 700-R4. If the cable breaks, the plunger goes back to minimum pressure in the transmission as it's spring loaded inside the trans, resulting in wiping out the clutches if you're driving. I know as it happened to me and I had to have the clutches and plates replaced. I have the Bowler setup installed on my 200-4R CZ transmission in my 88 SS.
Here's a good video on how the TV cable works on the plunger in the transmission:
GM TV transmission cable explained
I think you are mistaken. I was wrong about it applying max pressure when the cable is disconnected, it applies elevated pressure. The following was from another forum. If your transmission was rebuilt maybe they didn't install the check ball.
"fail safe mode" is when the TV cable minimum setting is not set correctly , there is a check ball that will seat ( if the builder installed it) and the transmission goes into fail safe mode..... which is high line pressure and late / firm shifts.
Same system is on a 700r4 transmission. Leave the check ball out and the fail safe system does not function.
Below this is from the 86 Monte Carlo manual.
2. The second function of the assembly involves the T.V. exhaust valve lifter rod, spring and the T.V. exhaust ball. The function of this system is to
prevent the transmission from operating at low (idle position) pressures, if the T.V. cable should
become broken or disconnected. If the cable is not connected or broken, the T.V. lifter rod will not move from its normal, spring loaded, up position
which holds the T.V. exhaust check ball off its seat. The T.V. lifter rod will drop down to allow the T.V. exhaust ball to seat only if the cable is broken, disconnected or extremely out of
adjustment. With the transmission pan removed, it should be possible to pull down on the T.V. exhaust valve lifter rod and the springs should return the rod to its normal up position. If the
throttle lever and bracket assembly or lifter rod binds or sticks so that the T.V. lifter rod cannot lift the exhaust ball off its seat, high line pressures and delayed upshifts will result. The normal shape of the T.V. lifter rod is shown in Figure
7A-6. The right angle leg must not be bent to any other angle or it will not function properly.