Credit Default Swaps

[Shaun @ Tru6]

Anyone know the worldwide volume and details of these derivatives?

[aways]

Check AIG's 10-K

[Scott at Pelican Parts]

Credit default swaps allowed the banks to buy the subprime crap without appearing to violate the Basel 2 rules. Let's hope the folks who come up with Basel 3 anticipate such shenanigans. The financial industry is better than most at inventing methods to blow through the rules of the game presented to them.

[dtw]

Most articles you read will go for the shock and awe of the gross CDS positions out there. They downplay the fact that the majority of the positions are against each other and net to nothing. Nonetheless, the true 'net' CDS positions, should they be called, could be quite a wet blanket for the financial markets - to put it mildly.

[Paul T]

Almost impossible to tell since they are not exchange traded, though that may change in the future.

[tabs]

There are people who job it is to stay up late figuring out arcane ways to game the system...

[JeremyD]

Not just the volume of the CDS but also the rating of the paper. Really the folks that rated this paper as investment grade A-AAA should be brought up on fraud charges. There are many hands in the til.

[Shaun @ Tru6]

Originally Posted by JeremyD

Not just the volume of the CDS but also the rating of the paper. Really the folks that rated this paper as investment grade A-AAA should be brought up on fraud charges. There are many hands in the til.

Given all the other variables and moving parts in the last 10 years that coalesced into worldwide recession, the one that truly made it happen was the ratings agencies. If the collateralized debt obligations and these derivatives had been rated accurately by the agencies entrusted, the bubble would have never grown as big as it did.

[Shaun @ Tru6]

Originally Posted by Paul T

Almost impossible to tell since they are not exchange traded, though that may change in the future.

if the health of the financial sector didn't have such a deep and consequential effect on the economy as a whole, we really wouldn't need to know. And since the Taxpayer is the "Swap Insurance of Last Resort," but financial Lobbyists keep Congress in power, we may never know.

[JeremyD]

Originally Posted by Shaun 84 Targa

Given all the other variables and moving parts in the last 10 years that coalesced into worldwide recession, the one that truly made it happen was the ratings agencies. If the collateralized debt obligations and these derivatives had been rated accurately by the agencies entrusted, the bubble would have never grown as big as it did.

My point exactly.

#1 We have to get special interest money out of Washington, DC
with special interest money lining their pockets, these lawmakers have conveniently looked the other way.

#2 If you conduct illegal activities (and I am specifically talking the financial industry) you go to jail. You do not pass go, you do not collect $200

#3 If you place the company in a risky proposition that you hope to benefit from and fail - then you fail. You lose your job, you lose your millions, your employees lose their job and if gross negligence is determined, then you are brought up on charges in a civil suit by the shareholders.

#4 If the government is so worried about two big to fail, then they should enact the same policies that they conduct for anti-monopoly / fair trade. If a bank gets too big [to fail], then once they get over a certain size, their required reserves should be increased by the fed. Maybe their discount rate increases based on size. That should flatten the playing field.

#5 Before ANY bonuses should be paid out for ANY bank/financial institution/organization the money that taxpayers paid should be paid back, in full, with interest, with penalties.

Just one man's opinion.

[m21sniper]

Special interests is just another name for someone else's interests. Special interest's aren't special at all. They're AMERICAN'S interests.

Is NRA a special interest? AARP?

Nonsense, these are groups of AMERICAN'S lobbying the gov't for their needs. I hate the phrase special interests. It's so stupid and unthinking a term.

[Shaun @ Tru6]

unsubscribed.

[craigster59]

Here's a 60 Minutes piece on CDS..

Credit Default Swaps - 60 Minutes - CBS News

[JeremyD]

Originally Posted by m21sniper

Special interests is just another name for someone else's interests. Special interest's aren't special at all. They're AMERICAN'S interests.

Is NRA a special interest? AARP?

Nonsense, these are groups of AMERICAN'S lobbying the gov't for their needs. I hate the phrase special interests. It's so stupid and unthinking a term.

Special interest as in not 100% in the interest of the people that elected them to their friggin position.

And yes, NRA is a special interest, AARP is a special interest. They have an agenda that they push that is not necessarily the same agenda as the populace so they have "special interests". :0

[nota]

interesting show on PBS the other night on this
details how the ann rand disciples totally screwed up
with the whole GOP dereg plus hands off approach
not only helped the credit default swaps be totally with out regulations
but the insiders screamed when a few people tryed to limit the secret trading
and get minimal oversite and disclosure

so this example is the true test and FAILURE of the neo-conned ann rand fanboys
when do you think they will notice, stop the BIG LIES, admit total defeat, and try a new idea
other then a endless train of lets rerun our failed ideas and try again harder
rather then give up on voodoo that has failed
deregulation allied with non-action by the few bush left in charge of financial over site
and the whole government is always evil and the markets know best

has the new teabaggers party dropped any of the many neo-conned notions that lead directly to this mess DO THEY EVER LEARN ???????????
it looks to me like they haveNOT
and if they ever get back in power
will quickly return to the SOS ideas and ideals that caused the bubbles and panics
and then again try to blame those soicalist get-toe lovers for the disasters

[Rich76_911s]

This from some digging on the most reliable source on the internet, Wikipedia:

According to the ISDA (international swaps and derivative association)

In 2007 the notional amount of CDS was $45 TRILLION

In 2008 the notional amount fell to $38.6 Trillion.

In 2009 the estimate is for 30 Trillion. But this is post an accounting change that took effect this year to eliminate offsetting contracts that cancel each other out.

Regardless as to whether or not these numbers are exact, the CDS market is gigantic.

Please now use Old Jedi mind tricks and repeat after me, "these are not the driods you are looking for."

[Paul T]

Originally Posted by JeremyD

Not just the volume of the CDS but also the rating of the paper. Really the folks that rated this paper as investment grade A-AAA should be brought up on fraud charges. There are many hands in the til.

Just a point of clarification, there are a lot of acronyms being thrown around here...there is no rating on CDS (credit default swap). There are ratings on the "underlying" bond issue, but no rating agency rates a swap contract, these are unique transactions between 2 parties.

CDOs and CMOs are another issues...

[jcommin]

Get a copy of the book:

The Sellout: [U]How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System [/U] by Charles Gasparino

It explains CDO's and other avenues that generated lots of money. It has the names, players, companies and defines all the terms.

I'm 2/3s thru this and the greed will just make you sick. The sad part is that many of the players are still involved in Wall Street. Case in point: John
Thain. This is the Merrill CEO that merged the company to Bank of America, not before he gave bonuses to the staff and had the expensive bathroom. He was forced to resign. Now with CIT as interim CEO.

[turbo6bar]

James Stack of investech claims the global total for derivatives, in general, is as high as $600trillion. Seems absurdly high. Of course, that includes all CDS & less sophisticated interest rate swaps, etc.

Ignoring Stack's estimate, the $30 trillion from Rich76911 sounds reasonable. What is the current value of that $30trillion in swaps, though?

It's disappointing that regulators and Wall St fuched this up so badly. It's beyond criminal.

I don't believe the ratings agencies should take the majority of blame. They were very guilty regarding debt obligations (mortgage debt repackaged), but the crappy defaults swaps (those pedaled by AIG and purchased by investment banks), were, AFAIK, traded between institutions. The CDS were buy one facet of this newfound 'financial innovation' oft mentioned by Alan Greenspam and Boom-boom Bernanke.

Shame on America.