Consequently, if the securities one party can turn to need are widely used to fund his broker’s company, it’s similar to the fractional book banking and will explain exactly why there are runs on shadow banking institutions.

Consequently, if the securities one party can turn to need are widely used to fund his broker’s company, it’s similar to the fractional book banking and will explain exactly why there are runs on shadow banking institutions.

18 Such tasks of shadow banking institutions were the origin of uncertainty for dealer banking institutions in 2008, such as for instance Bear Sterns, Merrill Lynch, and Lehman Brothers, adding to the outbreak for the crisis (Claessens et al., 2012, pp. 16–17). Hedge funds that pledged security to Lehman Brothers weren’t in a position to recover it whenever Lehman went bankrupt given that it had re-used it as the very own security (Fender and Gyntelberg, 2008, p. 7). 19

Possibly the numerous re-using of security are well comprehended by taking a look at organizations’ economic statements: “Off-balance sheet item(s) like ‘pledged-collateral that is permitted to be re-used, ’ are shown in footnotes simultaneously by several entities, i.e., the pledged collateral just isn’t owned by these companies, but because of rehypothecation liberties, these companies are legitimately permitted to utilize the security in their own personal name” (Singh, Aitken, 2010, p. 9). Notably, this training is appropriate and frequently, such as repo agreements, includes name transfer (Singh, 2012, p. 6 n5). 20 Andolfatto et al. (2014, p. 2) compose that the rehypothecation right is clearly stated in brokerage agreements that are most and it is very theraputic for consumers who are able to spend reduced interest levels to their money loans. Therefore, the debate between supporters and opponents of rehypothecation resembles the debate between supporters and opponents of fractional-reserve banking. ادامه خواندن “Consequently, if the securities one party can turn to need are widely used to fund his broker’s company, it’s similar to the fractional book banking and will explain exactly why there are runs on shadow banking institutions.”