|
Pittsburg, Kansas | The TBTF banks get to "reuse" collateral. This is the way they get up to 40-50-60 and even 70% leverage.
Think of rows and rows of dominoes placed on end on a table in a chain (a collateral chain) where when one domino falls over it starts a chain reaction to cause all the rest of the domino's to fall in succession.
Or think why the Fed had to do QE and buy crappy assets to bail out the banks last time.
It will be worse next time.
Banks do not live under the same set of rules as you or I would. They can create the money to loan you that goes into your checking account with the stroke of a computer keyboard. The TBTF banks can reuse collateral. If you or I created currency we would go to jail for creating counterfeit money. Or if we tried to use collateral more than once the bank loaning us the money would not be happy about it. Standard operating procedures for the international banks to create money out of nothing and to reuse (rehypothecate) collateral.
John
Edited by John Burns 1/31/2016 11:10
| |
|
Banks and FDIC/CDIC
