Dana El-Kurd

you know, like, like the pension fund of California, we're talking about mega corporations, insurance companies, the kinds of things that could actually buy these, like, you know, now this is where we get to one of the other problems, which is that these things are not insured.

So, what do you do in order to try to make it less risky?

What do you get if you can't pay the loan back?

And this is what's called collateral.

I don't know, swift punch in the nuts?

No, they take your house, right?

That's supposed to be the thing.

So, okay, the way that, like, shadow banking loans tend to work is that they have collateral, right?

So you give them something or... It's either you give them something directly or... You promise.

It's like if you promise to give them the thing.

Yeah, and...

Giving it to them directly is like a repo market thing.

We're not really going to get into those right now.

But that's also a kind of shadow bank.

But there's a problem, right?

Which is, what if the thing that you're paying, you're paying as collateral, like what if your house becomes worthless?

And what if, what if, Molly?

Then it's completely uninsured and there's no way to fix it because I don't even have anything to give you.

Now, Molly, what if, and this is purely hypothetical, it could never happen in the real world, Molly, but what if somehow someone, someone decided to use the same house as collateral for multiple different securities?

Well, that could never go wrong.