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> If the liabilities are collateralized by assets on their balance sheet, then the financial risk is not to Alameda but the lender! What does that mean? How co
by zby 4y ago
> If the liabilities are collateralized by assets on their balance sheet, then the financial risk is not to Alameda but the lender!
What does that mean? How collateralization changes Alameda risk?
It reduces the lender risk a bit - but it does not touch the borrower risk at all:
https://www.investopedia.com/terms/c/collateral.asp https://www.investopedia.com/terms/c/collateral.asp
"In the event that the borrower does default, the lender can seize the collateral and sell it, applying the money it gets to the unpaid portion of the loan. The lender can choose to pursue legal action against the borrower to recoup any balance remaining."
- moomin 4y agoI think OP is assuming things work the way US mortgages work, where you can walk away from the house. I think OP is labouring under a misapprehension here.
- guelo 4y agoThat depends on the terms of the loans. Can be recourse or non-recourse.
- zby 4y agoRight - but it looks like an exception not the standard way: https://www.investopedia.com/terms/n/nonrecoursedebt.asp https://www.investopedia.com/terms/n/nonrecoursedebt.asp Would you expect the Alameda loans to be non-recourse?