look at all the derivitives written on greece defaulting. The bond holders will get a 50% haircut and that isnt considered a default? Arent they changing the rules in the middle of the game? Been on the wto site looking for the rules on derivitives, your not allowed to regulate them as much as whats going on.
As mentioned elsewhere, the politicians have replaced the "free market" resolution to all crises. Some bought and paid for "regulatory" committee decides whether there is a de-facto default and whether the CDS contracts will pay out. So the market reaction is to cheer on this complete failure of the capital markets, but it's just another short term fix. All it does is add more illiquidity, less confidence and ultimately will make every subsequent "crisis" even more dire.
"Misplaced 55 billion" No wonder the banks are failing. How the hell can they misplace 55 billion. There are many things you could say about this but the fact is it goes beyond words.
It's not the first time this happens, so there's no "rules being changed". People who bought these sov CDS contracts knew the uncertainties and risks before they bought them. It's a sh1t contract and if you're getting screwed on it, you have nobody to blame but yourself.