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From: tom pope	9/20/2008 8:47:22 AM
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As the facts about CDS' become better known, startling stories have emerged, but this has to be one of the worst. A $2MM annual premium on a portfolio 650 times bigger. In one notorious case, a small hedge fund agreed to insure UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz), the Swiss banking giant, from losses related to defaults on $1.3 billion of subprime mortgages for an annual premium of about $2 million. The trouble was, the hedge fund set up a subsidiary to stand behind the guarantee -- and capitalized it with just $4.6 million. As long as the loans performed, the fund made a killing, raking in an annualized return of nearly 44 percent.

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