Posted on 03/03/2009 3:38:54 PM PST by dennisw
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I don’t believe this everyone knows that the banks are dyig because the government forced them to take money...
*laughs hysterically*
“The losses at American International Group (NYSE:AIG), which was the recipient of a vast public bailout last year financed by the Fed of New York for the benefit of GS, come in large part from the writing of CDS contracts on complex structured assets that AIG did not understand.”
or
“The losses at American International Group (which was the recipient of a vast public bailout last year financed by the Fed of New York for the benefit of Goldman Sachs and the other large CDS dealers banks) stem in large part from CDS contracts. And there are many other AIG-type situations festering in the United States and Europe that will burst into bloom in coming months. ”
BTTT
“”Meaningful margin discipline, collateral and risk limits will be imposed.””
Ha ha. Righto. Everything Obushma has done has been to validate this stuff, and continue with it. It will continue.
By the way, how are CDO swaps competitively fair to normal insurance companies who have to play by the regulations and keep reserves and follow laws and stuff? Its not. We should deregulate insurance companies so they do not need to keep any reserves. Freeedom! Deregulate!
Just kidding. CDOs should be regulated (horrors!) out of existence. Their whole reason for being was to get around established insurance laws.
Dumb people like us are too unsophisticated to fully understand CDS's.
Phil Gramm supports CDS's, so they must be good.
The wonderful, intelligent, and hard-working capitalists that ran our largest investment banks created CDS's out of the goodness of their hearts and the sharpness of their minds, so they must be good.
The current recession is 100% Obama's fault and when he is found to be really Kenyan and kicked out of office and replaced by Rush Limbaugh then the recession will immediately end, and a beautiful rainbow will wrap the world in its warm glow.
/sarc unneccesary
Truth! I agree with your take plus Phil Gramm was a major instigator to get Glass-Steagal repealed. Gramm is a very high paid lobbyist these days...not too shabby for a libertarian BS artist
Somehow the United States of America got along just fine for 200+ years without credit default swaps and other crappy derivatives
it all comes back to Goldman Sachs.. hmmm..
“Thus when Lehman Brothers filed bankruptcy, the writers of protection via those CDS contracts had to pay the buyer of protection 97% of the face value of the Lehman Brothers bonds, because there is expected to be little recovery for bond holders in the Lehman bankruptcy.
Here is what he does not say. The 97% loss on $400 billion of Lehmann bonds amounted to $388 billion. However, when the 40 major holders on both sides of the Lehman CDSs got together to settle up, only $4 billion total had to be paid out in cash. The rest was hedged.
But we can also blame it on David X. Li, the Chinese national who invented the formula underlying CDSs. The guy is now safely back home in commie China, and is not allowed to speak to the media about the economic conflaguration that his formula has wrought.
Here's a great Wired article on him and his Gaussian Copula formula:
Too much was gambled on future growth (look at P/E ratios from a year ago), a lot of which was credit fueled. It was a house of cards built on a house of cards.
Somebody needs to take a real close look at Goldman and its intertwined relationship with the Federal and certain state governments. These guys show up everywhere and it suggests shenanigans!
Here is what he does not say. The 97% loss on $400 billion of Lehmann bonds amounted to $388 billion. However, when the 40 major holders on both sides of the Lehman CDSs got together to settle up, only $4 billion total had to be paid out in cash. The rest was hedged.
Many credit default swaps can be put to bed at a reasonable price. Lehman was good news on that
How about the AIG credit default swaps?
They just might be impossible to reconcile at a reasonable price
I don't know enough about that but the USG just forked over 30 billion more to AIG to postpone that day of reckoning
Goldman Sachs has been connected (mafia style) to the Federal Reserve for years. Doing a lot of buying and selling of USG securities for the Fed. The Fed had always smiled most fondly on Goldman Sachs
The endless season of merging killed the big banks. They acquired all the toxics as they got bigger. The country would be better off if there were no mergers. Smaller banks would have watched their loans more carefully and any losses would have been absorbed. Bigger was definitely not better. Economy of scale is a mirage that needs to be reversed.
I happened to have the opportunity recently to listen to a presentation by one of these less-than-contrite quants, and he also pointed a finger at inadequate margining and chain netting, much like the original article does. I am not so sure that I agree with him or the original article on either point, but I think it's very clear that the folks in the game need to seriously rethink their modeling in addition to whatever might be done with centralizing clearing and upping the margin requirements for dealer-to-dealer business.
Mega bump
The pro-banker/pro-socialism crowd on FR should be ashamed of itself.
mark
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