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providers, who lend the collateral backing their investment vehicles to other investors for a fee.
That power can be exercised by central banks only because of the collateral backing the currency they create.
Mr. Todd also questioned the Fed's decision to accept stock as collateral backing a loan to a bank.
J. P. Morgan was trying to verify the status of the collateral backing its loans, Mr. Bienenstock said.
So far, the trustee has transferred the holdings of about 15,000 MF Global customers to new brokers, along with some of the collateral backing their trades.
Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.
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Tettament said he isn't sure what type of collateral backs the CDO, though he thinks returns exceeded 20 percent last year.It's a pretty common story: investors with big losses behave essentially like gamblers in a casino, trying to double down in order to recover their previous position.
The TALF, which goes into effect in the middle of February, will give non-recourse loans in exchange for collateral backed by consumer loans and other assets.
Higher default rates have lowered the value of all the collateral backed by mortgages.
By the same token, if real estate prices rebounded, A.I.G. has said, it could call some of the collateral back.
This is all well and good, until there's a spike in redemptions and providers need their collateral back in a hurry.
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