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New Year, New Words

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December 19, 2011 – Comments (5)

Hypothecation and Rehypothecation.

According to wikipedia, "Hypothecation is the practice where a borrower pledges collateral to secure a debt." My mortgage is one such example.

According to wikipedia;

Rehypothecation is a practice that occurs principally in the financial markets, where a bank or other broker-dealer reuses the collateral pledged by its clients as collateral for its own borrowing.

Apparently brokerages such as MF Global in the United States have the freedom to use any money clients put up as collateral against the clients own borrowing and simultaneously put 40% of that very same money up as collateral a second time against the brokerages borrowing.

It is as though there is 40% more money being put up as collateral than actually exists.

Apparently brokerages such as MF Global in Canada do not have that freedom.

So while Canadians do not get to enjoy all the freedoms we have here in the United States, the clients of MF Global in Canada do have the consolation prise of still having all of their money.

Best wishes,

Steven

PS. Corzine is a politician and probably a big mouth who blabbed the idea to all of his brokerage buddys. It is not like only one investment bank was involved in derivatives, or only one mortgage broker was involved in no doc loans. How safe is your money?

5 Comments – Post Your Own

#1) On December 19, 2011 at 8:47 PM, goalie37 (92.49) wrote:

Another that should be added - 

 

Self Regulation n.  The absence of regulation. 

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#2) On December 20, 2011 at 12:09 PM, chk999 (99.97) wrote:

Corzine is an Obama supporter.

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#3) On December 20, 2011 at 4:17 PM, motleyanimal (81.76) wrote:

Massturbulation. When large numbers of people do the same thing over and over, expecting a different result.

Examples. Voting, middle east wars, marriage, drinking, investing.

 

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#4) On December 21, 2011 at 6:13 PM, devoish (97.40) wrote:

chk999,

That's because he favors medicare for all so he won't have to feel guilty if he stole your health savings account, and felt this was the best way to point out how risky it is to depend upon a health savings account to begin with.

Best wishes,

Steven

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#5) On February 09, 2012 at 3:10 PM, DJDynamicNC (25.31) wrote:

"Self Regulation n.  The absence of regulation."

I quite like this one. Thanks, Goalie.

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