Possible EU moratorium on CDS payments. http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=326 From Institutional Risk Analytics: "We hear from a very well placed Buy Side investor with extensive business interests in the US and EU that three primary banking institutions in Europe, two French and one German, have such significant CDS exposure and other problems that they cannot even begin to fund the payouts anticipated over the next quarter. The funding squeeze reportedly is exacerbated by a near-collapse among weaker players in the hedge fund market, who were accustomed to receiving loans from one large French institution, which then stupidly converted the loans into equity. That's right. This past summer, when the bank put out a call for redemptions of $4 billion in hedge fund investments, says the source, only $400 million was returned. And the French bank also used these same hedge funds and others to reinsure some of its own CDS exposure. Sound familiar? Yup, just like AIG. Unlike the approach taken by Paulson and Geithner to bailout AIG and JPM (via the Bear Stearns rescue), however, the investor claims that EU officials are considering a moratorium on CDS payments by the three Euroland banks in question. The banks would be given ten years to write down their CDS and hedge fund exposures and would receive additional infusions of capital by their respective governments. The source claims that French banks have such huge exposure to both hedge funds and CDS, sometimes linked together, that the positions are beyond the ability of the EU governments to bail them out without a cessation of CDS payments. In the event, as other governments around the world follow the very reasonable example of the EU, the OTC derivatives market will implode and these unfunded liabilities may very well force the nationalization/liquidation of C, JPM and AIG, among others. And in the event, Hank Paulson, Tim Geithner, Alan Greenspan, Ben Bernanke and other senior officials at the Fed in Washington are going to have a lot of explaining to do to the Congress, to a new President and the global financial community."
"Unlike the approach taken by Paulson and Geithner to bailout AIG and JPM (via the Bear Stearns rescue), however, the investor claims that EU officials are considering a moratorium on CDS payments by the three Euroland banks in question. The banks would be given ten years to write down their CDS and hedge fund exposures and would receive additional infusions of capital by their respective governments. The source claims that French banks have such huge exposure to both hedge funds and CDS, sometimes linked together, that the positions are beyond the ability of the EU governments to bail them out without a cessation of CDS payments. " This is a good thing?
certainly go out of their way to sugar-coat it don't they "What Geithner and Fed Chairman Ben Bernanke failed to tell Congress, President-elect Barack Obama and the American people is that CDS dealers don't post any effective collateral at all with other dealers. So much for the legal requirements for safety and soundness in 12 CFR. If Barack Obama and the Congress ever needed a final reason to strip the Fed of all regulatory responsibility for financial institutions, the coming nuclear winter of CDS unwind is it."
How credible is this source? A large claim that EU will just remove itself from the system and start a collapse. And this would suggest a serious lack of coordination between central banks. Im not saying this source is not credible. I am a noob, and just wondering. Thx
Check out the rest of the site to make an easy determination like this. Are they doing real research and reporting? Or are they trying to spin to sell some product or service (like bank monitoring)? Are they a professional organization with a great reputation or is it run by two part timers? It's not rocket science.