> The problem arises when this loan has to be repaid. At that point, the bank will have to repay $100 to recover $75 worth of collateral. Assuming an absence o

> The problem arises when this loan has to be repaid. At that point, the bank will have to repay $100 to recover $75 worth of collateral. Assuming an absence of default, and the Fed being able to wait being paid back until the bond matures, then the collateral will be worth its par value (ie. $100).