Risk.net: Rehypothecation "driver of contagion" during crisis

This is more "smoke and mirrors". When leveraged deals are made collateral is required to compensate for the losses. This collateral is sitting at the investment house doing nothing but acting as security against client losses. Investment houses can profit from lending this collateral out, with the permission of the client. When Lehman went under, they lost this collateral, removing the legs underpinning hedge fund transactions, hence contagion. Why is this relevant? Because a gold ETF, GLD, had suspicious difficulty listing the serial numbers of gold bars held at the same time announcing customer authorised transfer to JPMorgan for collateral purposes, described here http://ftalphaville.ft.com/blog/2009/10/27/79826/glds-mysterious-disappearing-gold-bar-list/#comments