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Politics : Ask Michael Burke

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To: re3 who wrote (76275)	2/20/2000 12:23:00 AM
From: pater tenebrarum	Read Replies (1) of 132070

Ike, the answer to your question is simple: it is in the hands of the margin clerk to make you pay back your loan immediately if you're in danger of default. this was one of the reasons why corporations of all stripes were lending out money in the call market in the 1920's...essentially a margin loan is a riskless affair for the lender and the interest rate he charges on it is relatively high. as to how the brokers arrive at which stocks to pick for higher margin requirements, i believe that has to do with a stocks volatility. it is not in the brokers interest to see half of their clients wiped out in an internet stock swoon, and the wild price swings may furthermore sink a fully margined account so quickly that it is already in the red by the time the margin clerk can react.

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