Saturday, December 10, 2011

Rehypothecation and why everyone should know at least one Romance language

Courtesy of the ZH commenters on the re-hypothecation wheeze gradually being discovered by public.  At least the financial services public, who hopefully are getting this news out to the non-finance public.

[Spanish] hipoteca = mortgage

On Wednesday, 7 December 2011 Christopher Elias of Reuters dropped this bombshell:
MF Global and the great Wall St re-hypothecation scandal

I'm still trying to wrap my head around the implications of London's no-holds-bar on re-hypothecation, which I understand to believe that collateral can be pledged ad infinitum.  And because of that rule, MF Global shifted customers' collateral to its London branch to take advantage of that.  And because of that, the money wasn't stolen (it was, but rules and venues changed to cover the practice under the letter of the law) but LOST.  Like losing money at the blackjack table.

And you didn't even know you were gambling.  Have you figured out you're part of the 99% yet?

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