Fictitious Credit
If you deposited money with Ebenezer Scrooge or Gordon Gekko.
Outside of literature and film, it's a component of a short sale.
A short sale involves borrowing a security so you can sell it for cash. You hope the security will go down in price. When it does, you buy it back at the lower price, return the security you repurchased to its original owner, and keep the profit. You sold high and bought low, keeping the difference in-between.
When you make a short sale, you end up with cash in your account. Eventually, you have to use that cash to buy back the security in order to close out the trade. So when you make the short sale, you've created a margin requirement.
You have the money, but it's spoken for. It has to be used to buy back the security you've shorted. You can't actually use the cash for anything (other than closing out the short). It's not a real credit, like you'd have if you put your own unencumbered cash in the account. It's fictitious credit.
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Finance: What is the Credit Rating Agenc...4 Views
Finance allah shmoop what is the credit rating agency reform
act of two thousand six otherwise known as crack are
out out something like that All right yeah that's How
the real pros said anyway this act was meant to
improve the quality of company credit ratings like a blindfold
and dartboard should not be involved in making up are
you know coming up with corporate credit ratings Well the
law was ironically enacted in the hope that we would
avoid nightmares like the subprime mortgage crisis that almost brought
down the finances of while the entire country in world
And yes it worked in the same way that a
scale works in an embarrassing episode of the biggest loser
The idea was that the big three agencies moody's s
and p and fitch were colluding with each other and
raiding every security as a okay sort of the same
way wall street cell site analysts were leaned upon in
the nineties by bankers who paid them to rate every
company of strong by so that the companies would favor
the investment banks when doing lucrative secondary offerings and other
personal wealth management services for the founders and senior executives
Newly ridge from you know aipo booty The big three
then produced a product that wasn't reflective of the real
risks inherent in the marketplace Basically they had been labeling
pink slime and hot dog meat as great a sirloin
Yeah well the act made it much easier for smaller
firms to compete for business by doing high quality research
and not being afraid to give bad ratings tow bad
money butchers will The credit rating agency reform act of
o sixth gives both businesses and the government the tools
they need to fight off the shady hucksters of the
world And make sure the pink slime never you know 00:01:55.443 --> [endTime] such a cz your plate financially
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