Greece CDS sellers payout $2.89 billion to settle contracts

March 29, 2012 by · Leave a Comment
Filed under: Credit News 

Hopefully this will work out in the end and this nation among others will get their budget and entitlements in order.  At the end of the day, you need to have services that match what you can tax from your people so that you are not incurring debt that can have disastrous effects in the long run.

This is a major issue America will tackle over the next 50 years and hopefully we will learn a lesson that will stick with our citizenry and be taught to future generations.   We need to break this horrible habit of believing there is such a thing as a “free lunch”.   There always is a cost at some point that needs to be addressed and or offset.

Bloomberg  – Banks, hedge funds and other investors that sold credit-default swaps protecting against losses on Greece bonds paid a net $2.89 billion to settle the contracts, according to the Depository Trust & Clearing Corp.

The payouts were completed yesterday after the nation took steps to force investors this month to participate in the biggest sovereign-debt restructuring in history, New York-based DTCC, which runs a central repository for the market, said in an e-mailed statement today.

Source

Bernanke Says Fed Would Welcome ‘Full Review’ of AIG Aid by GAO

January 19, 2010 by · Leave a Comment
Filed under: Policy News 

I applaud this choice but I want to make sure we are clear that there are major questions about giving “back-door bailouts” to Goldman Sachs and a few foreign banks by giving 100 cents on the dollar for credit-default swaps AIG held.  Other counter-parties did take a discount or “haircut” on those debt insurance contracts so there is some explaining to do on those decisions.

To this point both Treasury and the Federal Reserve do not see any problem with their choices on this matter and the amount of U.S. tax payer money they used to bailout this insurance company.  Honestly, the financial products division did not need to be bailout out, their normal insurance operations where is separate subsidiaries so even if that company failed they would still be able to make good on their other obligations.  The reality is that major investment banks and foreign banks did not do proper due diligence on the ability of AIG to make good on this insurance in the event of a economic downturn and they should of been made to pay in a true free market system.

Bloomberg, New York - Federal Reserve Chairman Ben S. Bernanke said the central bank would welcome a “full review” of its aid to American International Group Inc. by congressional auditors and make all necessary records and personnel available to them.

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U.S. bill would restrict over-the-counter (OTC) derivatives with new regulations

July 30, 2009 by · Leave a Comment
Filed under: Industry News 

This is much needed.  In no way can we have financial instruments that equal ten times the globe’s GDP and not have it under strict regulation.  The reason is because these paper contracts were used to get more leverage which is fine when everything is stable but can be a total disaster when the economy goes south or the firms that have written these go bust and causes them to go to “full performance”.

These should not be on any off-balance-sheet transaction and any company holding them should have strict capital requirements just like any other form of insurance that protect the policyholder against the institution from defaulting.  If you read a book called “The New Monetarism” it has an interesting chart that shows an inverted pyramid with real assets at the bottom and OTC derivatives at the top and that represents global liquidity.   In this chart, these derivative instruments represented 75% of all the liquidity in the system.

News (Reuters):

U.S. financial regulators would gain the power to restrict holdings of over-the-counter derivatives under legislation to be considered this fall, the chairmen of two House committees said on Thursday.

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Investors show that canned soup is safer than U.S. Bonds

June 8, 2009 by · Leave a Comment
Filed under: Opinion 

This is quite funny that traders and investors actually prices the risk of the U.S. Treasury defaulting on thier obligations higher than Campbell Soup doing the same.  With the amount of bonds being issued and the rising interest rates from the “Bong Vigilantes”, I have to agree that canned soup is safer at this point.  

I heard a hearing with Ben Bernanke in front of Congress this weekend and he was asked if foreign investors could not buy all the Treasuries we are going to issue this year, would he monetize that debt via open market purchases.  He said he would not, I am not sure how he is going to “not” do that unless we are going to raise taxes through the roof and seriously cut government spending.   I don’t see either happening soon so I would think the easy way out for the politically minded folks, is to just print the money and devalue the dollar.

News (Reuters):

No, we’re not talking about stocking a bunker for survival. This is talk about safe investments.

U.S. Treasuries, traditionally considered the safest of all investments because the debt is backed by full faith and credit of the U.S. government, is losing favor among derivatives traders to Campbell Soup Co, Microsoft Corp and Intel Corp as concerns over the government’s massive deficits and costly bailouts mount.

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New York’s Attorney General Cuomo Widens His A.I.G. Investigation

March 31, 2009 by · Leave a Comment
Filed under: Legal News 

Hopefully we will see our justice system starting working soon and many of this actors in this huge fraud put on the the American (and others) people.  I am really surprised we have not seen the proverbial “witch-hunt” happened, its pretty obvious that crimes were committed and many people were complacent.  

Instead we are worried about millions in bonuses (what about the trillions in secret loans from the Fed?) or booting GM’s CEO when we have not removed one bank or insurance CEO when they have losses that amount to ten times what these automakers have.  In defence of the Big 3, at least they are providing jobs and we are making something compared to the shenanigans these banks are pulling.  Please Mr. Cuomo, set the precedent we need so these does not happen again, soon. 

News (NY Times):

Attorney General Andrew M. Cuomo of New York said Thursday afternoon that he was widening his investigation of the American International Group to examine whether its trading counterparties improperly received billions of dollars in government money from the troubled insurer.

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