Rehypothecation Nation
Okay, it’s never a good sign for a joke when the illustrator of the gag says “I don’t get it” and then you explain the joke again and he reiterates, “I still don’t get it”.
So before scrolling to the gag, the term REHYPOTHECATION needs to be explained! To understand rehypothecation you have to understand hypothecation first. Hypothecation simply refers to taking an asset and pledging it as collateral for a debt. For example, you may hypothecate your house to a bank in return for a cash loan. (If you default on the loan, the bank takes your house.)
Rehypothecation is when the LENDER uses your collateral as an asset to borrow. Meaning your asset has been repledged as collateral for something else by the lender of your loan. Essentially, the original collateral (your house) becomes a derivative asset (definition: derivative asset is whereby the banks and brokers use, for their own purposes, assets that have been posted as collateral by their clients.) Why would anyone agree to rehypothecation? Simple. Either A) the lender won’t lend without the ability to rehypothecate, or B) the borrower receives a preferrred interest rate on their loan via this agreement.
Now to the nerdy gag! (Robbinhell #48)
Okay if you didn’t get it, or did get it and didn’t find it funny, I completely understand. But to me, this is roll-over kinda stuff. Two bankers colluding to pledge the same asset and agreeing to the deal at the exact same time so nobody liable? LOL
Anyways, that’s gag fourty eight in the Highway to Robbinhell Saga. Til next time!
