hypothecation

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hypothecation

1 a method of creating a HYPOTHEC.
2 in politics, rather than law, the assignation of an element of taxation to particular beneficiaries rather than the general coffers of the Treasury.

HYPOTHECATION, civil law. This term is used principally in the civil law; it is defined to be a right which a creditor has over a thing belonging to another, and which consists in the power to cause it to be sold, in order to be paid his claim out of the proceeds.
     2. There are two species of hypothecation, one called pledge, pignus, and, the other properly denominated hypothecation. Pledge is that species, of hypothecation which is contracted by the delivery of the debtor to the creditor, of the thing hypothecated. Hypothecation, properly so called, is that which is contracted without delivery of the thing hypothecated. 2 Bell's Com. 25, 5th ed.
     3. Hypothecation is further divided into general and special when the debtor hypothecates to his creditor all his estate and property, which he has, or may have, the hypothecation is general; when the hypothecation is confined to a particular estate, it is special.
     4. Hypothecations are also distinguished into conventional, legal, and tacit. 1. Conventional hypothecations are those which arise by the agreement of the parties. Dig. 20, 1, 5.
     5.-2. Legal hypothecation is that which has not been agreed upon by any contract, express or implied; such as arises from the effect of judgments and executions.
     6.-3. A tacit, which is also a legal hypothecation, is that which the law gives in certain cases, without the consent of the parties, to secure the creditor; such as, 1st. The lien which the public treasury has over the property of public debtors. Code, 8, 15, 1. 2d. The landlord has a lien on the goods in the house leased, for the payment of his rent. Dig. 20, 2, 2; Code, 8, 15, 7, 3d. The builder has a lien, for his bill, on the house he has built. Dig. 20, 1. 4th, The pupil has a lien on the property of the guardian for the balance of his account. Dig. 46, 6, 22; Code, 6, 37, 20. 5th. There is hypothecation of the goods of a testator for the security of a legacy he has given. Code, 6, 43, 1.
     7. In the common law, cases of hypothecation, in the strict sense of the civil law, that is, of a pledge of a chattel, without possession by the pledgee, are scarcely to be found; cases of bottomry bonds and claims for seamen's wages, against ships are the nearest approach to it; but these are liens and privileges rather than hypothecations. Story, Bailm. Sec. 288. It seems that chattels not in existence, though they cannot be pledged, can be hypothecated, so that the lien will attach, as soon as the chattel has been produced. 14 Pick. R. 497.
     Vide, generally, Poth. de l'Hypoth‚que; Poth. Mar. Contr. translated by Cushing, note. 26, p. 145; Commercial Code of France, translated by Rodman, note 52, p. 351; Merl. R‚pertoire, mot Hypoth‚que, where the subject is fully considered; 2 Bro. Civ. Law, 195; Ayl. Pand. 524; 1 Law Tracts, 224; Dane's Ab. h.t.; Abbott on Ship. Index, h.t.; 13 Ves. 599; Bac. Ab. Merchant, &c. G; Civil Code of Louis. tit. 22, where this sort of security bears the name of mortgage. (q.v.)

References in periodicals archive ?
rehypothecation has become the norm in the marketplace, as the vast
Further, "if rehypothecation has occurred, the collateral taker is expected to return equivalent securities and not exactly the same property initially received as collateral" (Singh, 2012, p.
Gillian Tett of the Financial Times highlighted a recent International Monetary Fund (IMF) paper that estimated, "The seven largest US brokers were getting about $4.5 trillion of funding from rehypothecation activity" by 2007 ("Web of Shadow Banking Must be Unravelled," August 2010, www.ft.com/cms/s/0/112ff210-a62b-lldf-9cb9-00144 feabdc0.html).
This reuse of collateral is called "rehypothecation." Rehypothecation means that there is a money velocity associated with the collateral.
It allows the daily repo trading volume of a particular note issue to exceed the outstanding amount of the issue, as participants are able to borrow and lend a single piece of collateral repeatedly over the course of a day." Manmohan Singh and James Aitken (2010) argue that measures of repos are significantly larger when rehypothecation is taken into account.
Huertas, director of the Financial Services Authority (FSA) in London, has shared his further concerns, as far as margining goes, with Risk magazine regarding the issues of rehypothecation, cross-margining, and the geographic and legal access to capital.
(9) The rehypothecation of GCF Repo-obtained collateral into a tri-party repo trade will not, by itself, generate enough cash to fully pay off the clearing bank's credit extension to the reverse repo dealer, because there are margin requirements for tri-party repo trades.
Third, it would have to be the case that the unintended consequences of Lehman's failure--such as the Reserve Primary Fund (a large money market fund with exposures to Lehman Brothers debt securities) "breaking the buck" and the resulting run on money market funds and the rehypothecation (12) and freezing of hedge fund assets at Lehman's UK prime brokerage unit--could have been identified a priori.
The IRS did not address the issue of sale or rehypothecation of the pledged shares.
are said to be registered in 'street name'"); see also Mariya Deryugina, Standardization of Securities Regulation: Rehypothecation and Securities Commingling in the United States and the United Kingdom, 29 REV.
As Customer A purchases the securities on margin, the dealer gains rehypothecation rights over the collateral posted in the amount of 140 percent of the margin loan, which is $700 of Security Q in this example.