Pile-up as Peloton runs out of road

All mortgage bonds began to plunge in value. With Wall Street’s major banks still writing off bad debts at unprecedented rates, credit committees were looking for excuses to rein back their lending.

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In the first few weeks of the year, Beller began to receive twitchy calls from his bankers.

With the value of the assets he held in his portfolio in free fall, the banks were tightening his credit terms. They were also demanding that the fund should put up more collateral to support its positions.

To meet these new terms, Beller began to sell some of the AAA mortgages in his portfolio...