[David]

I know virtually nothing about buying commodities, but I was discussing this with a buddy who does.

Someone please correct me if I'm wrong, but here goes: These banks buy commodities on margin, say 10%, meaning they don't actually have all the money to buy the commodities, just 10%. This is all well and good as long as the price goes up. If the price goes down, they must come up with the difference between the full purchase price and the current lower price. So as the price drops they have to come up with more and more money and far more than the original 10% they put up.

I heard some banks invested even more as the price dropped, hoping this would boost the price so they wouldn't loose money, but instead lost even more.