Big banks could lose big bucks after a major hedge fund defaulted on margin calls

The i-banking equivalent... of defaulting on your mortgage and getting foreclosed on: getting your multi-billion dollar positions sold off after missing a margin call. Trading on margin = trading (partly) with borrowed money (usually from a broker). Margin call = when equity in your margin account falls below a minimum level, and the lender asks you to put up more of your own cash or sell positions to mitigate risk. They can happen when the value of holdings in a margin account plunges.

• Call: Last week, a bunch of big banks told a large US hedge fund (reportedly: Archegos Capital Management) that it needed to put up more $$$ to keep its positions.
• Response: Archegos basically said "IOU but ICPU" (I can’t pay you). AKA: it defaulted on the margin call, leaving the banks that loaned it money exposed to billions in losses.
• Result: Banks started selling off Archegos' positions to meet the minimum equity requirements for the margin account (and recoup some of the losses).

It's a cascade effect... This big margin default is trickling down from the fund to banks to regular investors. For banks: this could mean billions in losses. Credit Suisse and Nomura warned of significant hits to their quarterly financials — both stocks plunged as much as 15% yesterday. Now, banks' damage-control is causing collateral damage: retail investors.

• Last week: Morgan Stanley, Goldman Sachs, Credit Suisse, and others quickly dumped a bunch of stocks tied to Archegos, forcing it to liquidate nearly $30B worth of positions.
• That selloff caused many of those stocks to fall — including Viacom, Discovery, Tencent, and Baidu — even while the broader market rose. Viacom has plunged a whopping 30% since Friday.