Carlyle Capital Corp. (CCC) failed to meet margin calls. It is a listed (Amsterdam) investment company that bought AAA-rated GSE paper (FannieMae's, etc.) on margin. The idea was quite simple: capture the yield spread between margin loans (via ABCP, repos, etc) and the GSE securities.
Just like all such interest differential arbitrage operations, the size had to be huge to make it worthwhile. From the 2007 annual report:
Total Equity: $669.5 Million
Total Assets: $21.8 Billion (mostly GSE's)
Divide and ...(drumroll)... leverage: 32.5 times
ABCP is asset backed commercial paper. A company or group of companies looking to enhance liquidity may sell receivables to a bank or other conduit, which, in turn, will issue them to its investors as commercial paper. The commercial paper is backed by the expected cash inflows from the receivables. As the receivables are collected, the originators are expected to pass the funds to the bank or conduit, which then passes these funds on to the note holders.
GSE is Government Sponsored Enterprise, which supplies credit for mortgages and sells bonds.
Once there was a fellow who discovered this business in Israel. The high volume of his bank operations (he was a public employee, a math teacher) alerted the tax people, but all his operations were legal. However, they taxed him as a professional stock exchange broker (I presume 55% of gross profits plus 17% bituach leumi social security tax), which made the business wholly unprofitable. It does not work in Israel.