Comments on: LEH CDS Catalyst http://www.tasgall.com/2008/10/09/leh-cds-catalyst/ Peering into the Cauldron of the Gods... Wed, 28 Sep 2011 10:20:57 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Jason G. http://www.tasgall.com/2008/10/09/leh-cds-catalyst/comment-page-1/#comment-1635 Jason G. Sun, 12 Oct 2008 16:13:38 +0000 http://www.tasgall.com/2008/10/09/leh-cds-catalyst/#comment-1635 A similar threat... if GM and Ford are destined for bankruptcy, this LEH CDS settle will be a small potato. There is over $1 trillion in CDS insurance against GM's debt. Bond holders tend to be the buyers of CDS insurance, and they receive the payout when the bonds default. Who do you think is going to be paying up on the GM bonds when they go bankrupt? Think about that when you hear about the Treasury nationalizing the brokers (or banks)... and think about how GM is now too big to fail, and will ultimately be backed by the US government, whether as an ongoing business or as insurance on bond default. A similar threat… if GM and Ford are destined for bankruptcy, this LEH CDS settle will be a small potato. There is over $1 trillion in CDS insurance against GM’s debt.

Bond holders tend to be the buyers of CDS insurance, and they receive the payout when the bonds default. Who do you think is going to be paying up on the GM bonds when they go bankrupt?

Think about that when you hear about the Treasury nationalizing the brokers (or banks)… and think about how GM is now too big to fail, and will ultimately be backed by the US government, whether as an ongoing business or as insurance on bond default.

]]> By: Jason G. http://www.tasgall.com/2008/10/09/leh-cds-catalyst/comment-page-1/#comment-1634 Jason G. Sun, 12 Oct 2008 15:12:57 +0000 http://www.tasgall.com/2008/10/09/leh-cds-catalyst/#comment-1634 More on the CDS settle will happen on 10/21. Dealbreaker comments: "Further, because CDS contracts are OTC arrangements, there's no central clearing party. Lehman might, for instance, be a counter-party in several of the transactions. Somewhere out there, $350 billion or so in cash is going to have to be raised, which might go a long way to explaining the liquidity issues floating around these last many days." http://dealbreaker.com/2008/10/halloween-comes-10-days-early.php More on the CDS settle will happen on 10/21. Dealbreaker comments:

“Further, because CDS contracts are OTC arrangements, there’s no central clearing party. Lehman might, for instance, be a counter-party in several of the transactions.

Somewhere out there, $350 billion or so in cash is going to have to be raised, which might go a long way to explaining the liquidity issues floating around these last many days.”

http://dealbreaker.com/2008/10/halloween-comes-10-days-early.php

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