Re-hypothecation

A new word we need to learn: re-hypothecation. Hypothecation is when a borrower pledges collateral to secure a debt. Rehypothecation, in short, means lending of property lent to one, but of whom one is not the owner. The biggest misuse of re-hypothecation might be the current MF Global scandal. Read this article to see how large and established financial institutions break the law or use loopholes to enrich themselves and have the unaware customers pick up the losses when the bets fail: MF Global and the great Wall St re-hypothecation scandal.