Mish's Global Economic Trend Analysis Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Chispas who wrote (74855)	2/18/2008 9:51:20 PM
From: Gemlaoshi	Read Replies (2) of 116555

Chispas, Thanks for the excellent article. Gretchen Morgenson is an excellent writer, and I enjoy her articles. However, that article leaves much unsaid. CD swaps "sort of" act like insurance on debt, but the ISDA contracts on CD swaps state that swaps ARE NOT INSURANCE. As such, they escape insurance regulation and insurance law. If one had to have an "insurable interest" (e.g. ownership of a bond) then the CD swap notional value could not be several times that of the bonds they supposedly insure. When the **it finally hits the fan, swap counterparties are not going to go BK honoring those contracts. The response will be "so sue me and see what you get". At some point the financial burden outweighs the legal risk and the settlement system will seize up. There are other problems with swaps that make the VaR models laughable. But that's for later... Dave

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next