Those collateral assets start out covering the loan, but are often invested in t... | Hacker News

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cheriot on April 1, 2017 | parent | context | favorite | on: Robinhood stock trading app valued at $1.3B with b...

Those collateral assets start out covering the loan, but are often invested in the same assets as the borrowed money and will loose value at the same time. So when the collateral no longer covers the loan, the investor gets a margin call and doesn't have the money... then what?

Does the broker have any recourse to credit bureaus or courts?

mcguire on April 2, 2017 [–]

The margin requirements don't allow the loan to exceed the collateral assets. See http://www.investopedia.com/terms/m/margincall.asp

(Actually, I'm not sure what would happen if the stock went to zero instantly and was the only asset in the account.)

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