But you can't turn a large amount of stock into 100% cash through a loan, either. Many banks will give you <<100% of the stock value in cash, but no bank will

But you can't turn a large amount of stock into 100% cash through a loan, either. Many banks will give you <<100% of the stock value in cash, but no bank will give you close to 100% of the value[1]. You get to pay interest on the cash loan, too, which makes it worse than a pile of cash. The scams, as far as I can see, relate to the bank overvaluing the collateral or its liquidity, which is rightly the bank's fault, so it's reasonable that they bear the risk and get screwed. Unless it's a pure scam though, the lendee gets screwed too, by losing the collateral (and a lot more of it than necessary, if it's liquidated at short term lows). [1] Unless the bank is playing the bubble game of collecting interest on the loan and not caring if the loan defaults or the underlying asset drops below the outstanding loan amount (could be either because they anticipate a bailout, or they already got fat salaries and bonuses and don't care if bank goes down in flames, but most of that kind of fiduciary irresponsibility is punished by regulations).