Thornburg Mortgage (NYSE: TMA) took another devastating hit on Monday, announcing even more margin calls that cinched its liquidity belt even tighter and spurred some observers to question its future viability as a business.

Shares of New Mexico-based Thornburg collapsed as much as 59% on Monday, as investors learned it had received an additional $270 million in margin calls. Last week, Thornburg disclosed a $300 million margin call, but reiterated its confidence in future operations and blamed most of the fuss on market dislocations, not actual credit losses.

This time around, the consequences might be a bit more severe. Management stated that a majority of the latest margin calls could not be immediately met because of a lack of liquidity. That kind of talk, especially coming from the top brass, brings into question the possibility of a looming bankruptcy, which undoubtedly accounted for the majority of the massive stock decline. So how did Thornburg -- typically known as a conservative lender -- get into such an ugly mess to begin with?

You gotta lower your standards, dude
Investors have basically shunned anything less secure than government treasuries, creating quite a stir in the municipal, mortgage, and corporate debt market that many companies like Thornburg rely on to fund daily activities.

That puts Thornburg in a bind. The margin calls have resulted from declines in the market value of its portfolio of mortgages, as well as its reliance on so called "mark-to-market" accounting, which dictates that a company's assets should be valued at the going market rate, however insane that might seem.

That means even if Thornburg's investments perform well, it may be forced to write down more of the value of those investments, and in turn be forced to put up more capital to satisfy its bankers.

Bad timing, guys
In the short term, Thornburg will likely be forced to raise the needed capital by selling assets at a significant loss, by taking on debt -- not a likely scenario if its future is so up in the air -- or by selling stock. Selling stock is probably the most feasible option, but it would come at a hefty price. Thornburg's shares sit 82% below where they traded a year ago, so selling shares risks wiping out a significant portion of shareholder equity. E*Trade (Nasdaq: ETFC) faced a similar situation last year after raising cash by selling battered assets, leaving shareholders hammered even after many problems were resolved. Even in a best-case scenario, Thornburg shareholders will have to absorb some heavy punches.

As I pointed out last week, the alt-A section of Thornburg's portfolio held the blame for the declines, and those declines could actually be rationally justified. Alt-A mortgages carry more uncertainly, if not  more risk, than loans that can be sold to Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). As investors balk at anything that doesn't provide 100% certainty, alt-A mortgages have been pounded into the ground. Any asset -- be it a stock, bond, house, or CDO -- is worth what someone else is willing to pay for it; no more, no less.

You know it's a doozy when ...
However, with so much turmoil in credit markets these days, reliance on mark-to-market accounting has caused some to question whether new accounting standards should be implemented to assist companies like Thornburg, which thinks it's being unjustifiably victimized by an irrational market.

That's a question even the brightest of the bright seem to be perplexed by. When asked about an alternative to mark-to-market accounting, Fed Chairman Ben Bernanke himself stated, "I don't know how to fix it ... I don't know what to do about it."

(Note to self: When the chairman of the Fed admits defeat and acknowledges he doesn't know what to do, it may be time to stock up on canned food and resume practicing ducking under school desks.)

Baffled investors, meet Mr. Market
Every company is subject to investors' ups and downs, especially those that rely on secondary markets to buy and sell securities. While writeoffs from the likes of Citigroup (NYSE: C), Merrill Lynch (NYSE: MER), and Countrywide (NYSE: CFC) stemmed largely from overestimating the resilience of the real estate market and underestimating risk, some market turmoil comes from nothing but outright panic. It could spell a quick demise, even for those who may not deserve it.

At the end of the day, those who take on risk bear the costs. While Thornburg pursued what many considered conservative lending practices, its reliance on debt from investors who currently take a very different view -- rational or not -- could dictate its future.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. He appreciates your questions, comments, and complaints. The Fool's disclosure policy is all about investors writing for investors.