Borrowers unable to meet margin calls and finance their asset holdings were forced to sell, driving down asset prices further and setting off a cycle of deleveraging and further asset liquidation.
To monitor intermediation by broker-dealers, the Federal Reserve in 2010 created a quarterly Senior Credit Officer Opinion Survey on Dealer Financing Terms, which asks dealers about the credit they provide.6 Modeled on the long-established Senior Loan Officer Opinion Survey on Bank Lending Practices sent to commercial banks, the survey of senior credit officers at dealers tracks conditions in markets such as those for securities financing, prime brokerage, and derivatives trading.7 The credit officer survey is designed to monitor potential vulnerabilities stemming from the greater use of leverage by investors (particularly through lending backed by less-liquid collateral) or increased volumes of maturity transformation.