Major Canadian bank misses margin call
Bob Morris @ Mar 2nd 2008 00:17 - Category: Credit crisis
The Bank of Montreal, 4th largest bank in Canada, couldn’t make a $500 million margin call on their TGFKAI (Toxic Garbage Formerly Known As Investments) on Thursday.
For those who may not understand the process, this means they borrowed money to purchase securities which dropped so much in value that the borrower lender demanded more money as collateral. That the bank could not make the margin call is scary. Not only do they not have available cash to make the margin call, they also can’t sell the securities to raise money because there is no market for them.
Of course they are making all the appropriate perky noises about how they will “restructure” and get through this little bad patch. Maybe.
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Nitpick on 09 Mar 2008 at 11:21 pm #
I hate to nitpick but your sentence should read:
“For those who may not understand the process, this means they borrowed money to purchase securities which dropped so much in value that the *lender* demanded more money as collateral.”
BMO is the borrower. They were lent money by lenders.
peace.
Bob Morris on 10 Mar 2008 at 7:50 am #
Fixed! Thanks (must have had a brain disconnect when I typed that)