Tuesday, October 21, 2008

Barkless



Then, part 2 took place today. The sellers of the CDS settled with the
buyers. And NOTHING happened...or, rather, the sellers shelled out about $6
billion or so to the buyers and everyone went home. No CDS counterparty failed
to perform! The cash collateral margining mechanism worked just fine. A handful
of small hedge funds might fail...because they typically borrow to meet their
CDS collateral margin calls...so lenders to those funds may have a problem, but
NOT the CDS counterparty. But so far none has.

And the overhang?...well
almost all of it is HEDGED, i.e., offsets other obligations...when these were
all netted....the actual required payout was LESS THAN 2% of the notional amount
of the CDS contracts.

I'll be waiting for the big news report on this in
the MSM and their informed observers.


There you have it.

Posted by at