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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: re3 who wrote (76275)	2/19/2000 9:56:00 PM
From: Giordano Bruno	Respond to of 132070

i find this too funny, really, that stocks of dubious quality can generate quick margin loan $$$. let a guy try to get a loan for a house or car, the bank really grills you about the collateral. LOL, abundant 50% loans on profitless companies tied to everything you own.

To: re3 who wrote (76275)	2/20/2000 12:23:00 AM
From: pater tenebrarum	Read Replies (1) \| Respond to 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.

To: re3 who wrote (76275)	2/20/2000 10:02:00 PM
From: Dennis O'Bell	Respond to of 132070

I actually think it's healthier for the brokerage firms to assign margin levels on stocks based on their feeling of risk than have some blanket "tous azimuts" legislation. It's in their interests to avoid the hassle of going after a client who's balance has fallen in the red. At fido where I have accounts most of the stocks you cite are at 80% margin, though SCH (I checked) is only at 50% I can imagine how many homes or cars would be sold if one had to make an 80% down payment! Margin against one's home seems like an end-run around the controls though, but I suspect this case is a minority of the outstanding margin debt.