Abstract

A margin call asks a borrower to post more collateral when a position loses value. It rests on a picture of what the collateral already posted is worth and of where fresh collateral will come from. Walter Bagehot's Lombard Street (1873) rests on a picture of the same kind: a store of ready money, held by one institution for a whole system, which must be lent out boldly when everyone else is hoarding. This article groups the literature in two lines. In the first, which includes Kindleberger's history of crises and of the lender of last resort, such a holder stands outside the panic it relieves; in the second, drawn from Minsky, Bookstaber and Perrow, the danger lies inside the system, where liquidity vanishes when it is most needed. This article reads Chapter II of Lombard Street, with Chapters XI and XII where they bear on the reserve, and argues that Bagehot's text holds both positions. Securities reckoned as reserve cannot be sold in a general panic; reserves placed with bill-brokers are called in when the brokers most need them; one drain both shrinks the Bank's means and raises what it must lend. The article then reads two synthetic decision records published by WSTiger, a studio of the RISCON family: one about collateral that falls in value as the position it secures loses, the other about a loss on one position eating the margin shared by all. Both records refuse to count collateral by quantity alone. Their revisit lines name a path to compute but no figure or date. The records are modern synthetic scenes with no outcomes, and the article does not judge which option is right.