Rehypothecation

[cwaddle]

I think there may be a mistake here. The rehypothecation is not on the car, but on the asset which will provide the regular payment from Helen with the hypothecation.

[Rockyroopam]

subscribed ;)

[finalcon2]

Jimmy is pretty stupid to loan that money at that condition

[dishesdealer417]

it isn't magic, it is fraud.

[dunk1978banker]

cheers Paddy good vid.

[laskji]

So what does re-hypothecation accomplish? I thought that the point of collateral is that it can be used to pay the debt if the borrower fails... In this case jimmy only gets collateral if Helen fails to pay.... But why would jimmy lend on the bet that Helen will fail to pay?? Doesn't seem like colateral to me.................

[laskji]

@laskji Or is rehypothecation just a cheap excuse to make a risky loan??

[yrebrac]

@laskji yes crucial point that wasn't addressed. the problem is not when the end lender can't get the collateral - clearly they wouldn't lend if they couldn't. The problem is when the end lender claims the collateral. This is what happened when (allegedly) JP Morgan issued a margin call to MF Global - they stole customer property. This shouldn't be legal but it is. Especially in the UK.

[laskji]

@yrebrac Ok, so basically Helen is getting shafted for no reason? Why would anyone ever take alone from someone who was going to use their property as collateral? Or are people not aware of this? For example, was MF Global's customers not aware their property was being used for these purposes? Is it kept secret?

[yrebrac]

@laskji correct - customers weren't aware. There is a legal clause that allows customers' segregated funds to be reinvested by the broker. This only came out recently. However there are US institutions set up to protect market participants that failed in their job. It turns out that almost every financial institution is doing it to one degree or another. Even banks. And because this behaviour is "off balance sheet" it's not reported. You wouldn't know it is happening even if you looked for it.

[clodester]

Debt leveraged by more debt....

[pirucreek]

I think when you re-hypothecate when MF Global goes bust, Jimmy gets to keep title to the car. Helen gets nothing.

[pirucreek]

I think if you want to buy 100 shares of IBM on margin, the broker will re-hypothecate the IBM shares after you buy them to the bank that gave the margin loan.

[yrebrac]

@pirucreek No. Rehypothecation is a separate profit generating activity of the broker. Not part of a regular margin transcation.

[xranger56x]

but wouldnt jimmy just own the loan? so helen would just make her payments to jimmy and not billy?

[mark7996]

Very good, thank you!

[momoz88]

CDO cubed :)

[shawnski001]

@marketplacevideos Could you kindly clarify what I just noted to streetmoney21 below?

Thanks!

[kutblok]

J.P. Morgan wasn't out of luck. They just took the car.

[streetmoney21]

Thank you for making this video. I explained this to my subscribers in regards to the MF global case, which really exposes the risk in the financial system where this is being done with high levels of leverage in Europe.

[shawnski001]

@streetmoney21 Hang on here mate... this is only the tip of the iceburg isn't it? For every transaction like this is it not subject to the fractional reserve system whereby they are inflating the monentary base "M-whichever" every time they do it? Is is not the reason that financial London is now ridiculously overleveraged to their GDP?

[gapoom]

So, can Jimmy go after the gal's car if the 1st banker goes out of business? Can he call her up and say, "You don't know me, but I own your car."?

[zz911wasInsideJobzz]

@gapoom No. Jimmy threatens to kill Billy if he doesn't pay him back so Billy goes and steals Helen's car and gives it to Jimmy.

That's what MF Global did to their customers. MF Global's loan shark was none other than JP Morgan.

[optionsupdate]

@gapoom why would he not just collect the loan payments for the car?

[rachelvirienna]

I LOVE your dry erase marker wand!