Last Friday's Financial Times had an article about a dangerous new practice that banks are trying to foist onto corporate borrowers. The international banks want to price loans against the credit default swaps of a company on a variable, floating basis. That article points out that this would give hedge funds and speculators the power to destroy any company they wish.
The raiders could short its stock and them float the market with orders to buy credit defaults swaps of the company. As are no natural writers of these alien instruments, the price would rise explosively, and then the interest rates on the company's debt would skyrocket. And that would crush the company's earnings, in turn crushing its stock price. Payday for the raiders ... created for themselves.
A natural money machine for bear raiders. Of course we know they have already done this for those extremely credit sensitive institutions, viz. the banks and investment banks.
The solution to this is an internationally agreed edict that outlaws these contracts from any nation in the financial system.
Credit insurance - true insurance - can still exist and be available for commercial transactions only. Those would be regulated as insurance by the states or a future national insurance regulators.
To paraphrase the writer of the Financial Times article, since credit default swaps are "weapons of mass destruction" in financial transactions, let's not permit the banks to weaponize them and proliferate them to the raider community.
PS: I read the EU is blocking the French plan to add capital to its banks to increase lending. Amazingly stupid of the EU. The EU and the ECB are so far off the marks on this crisis that I wonder if the EU can truly survive.
Word of the Day
"Firman" - noun [$10] from Persian
Firman means 1. an oriental sovereign's edict; 2. a grant or permit.
Sentence: Derivatives needs to be regulated strictly and financial institutions should be required to obtain a positive firman before entering into or trading any type of derivative.
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44 comments:
plaxico making pac man look not so stupid.
eagles sux
SEC pffffffffffffffffffft
Clemson crushes Spurrier
Ga Tech 400+ rushing yards on the Dawgs
Deamon Deacons cruise past Vandy
ACC ACC ACC ACC ACC ACC
FT reports hedge funds have been hit by a fresh wave of withdrawals as investors search for cash, prompting more funds to impose emergency measures to block repayments. London Diversified Fund Management, one of Britain's best-known fixed- income managers, on Friday suspended both its hedge funds as trading conditions in the derivatives markets created valuation difficulties ahead of redemptions.
this move in treasuries is bordering on laughable.....
VICTORY!
Seems to me Hank the Tank should issue lots of bonds to those willing to lend US 10-30 years around 3%
insanity
what time is Rutgers kickoff ??
'if all else fails'
no one 'crushed' anyone
the SEC doesn't take the ACC seriously......besides.....it's not polite to hit a girl
I believe 8 pm Thursday night sir....I can already smell the ribs barbequing on the grill...Let's keep those party balls flowing....
bud must be hatin the spear chucker even more!
he is gonna get more face time with her than her hubby.
no one is more happy than slick willy.
rumor has it he is interviewing interns. no need to apply, if u a male.
Spinny wins the pool...the feel for bitter behavior provided by a regional advantage...all talk no swing indeed.
Telll him what he's won Johnnnnyy!!!
ITS A YEARS SUPPLY OF DOUBLE ROASTED Hazelnut Dream Swiss Water Decaf Mild blend coffees!!!
back to yoouuuuuuu Wink
Rutgers ? You guys follow high school teams ?
oh no...Bman takin shots at the scarlett knights now
LMAOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
ok, not HS ... it it in division III or IV ?
lmaooooo Bunkerman....thats a waist high fastball sir...
The National Bureau of Economic Research said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy .
wow, i need to go work there.
what amazes me, is the recession isnt over, by their accounts.
dear prudence knew it was the 4th qrt of last yr. how did she know?
she looked around around, round. Look around, around, round. round, round, round. all u had to do was look around................
i put my home up for sale today.'
ill let u know if housing bottomed in july.
:-)
Bunky...where are those pesky real buyers...setting a trap for the beefer bears...check that, Mrs B a lil help here please.
bearvers 10 units...kiss of death...looking for 4, soup bowl indeed.
I suspect real buyers waiting for deluge to stop.
No use charging during the shelling.
Maybe under 800 S&P, I might put some $ to work
bearvers 10 units...kiss of death...looking for 4, soup bowl indeed.
loooooooooooool..oh man....2 more months in ze coola
Hoooooooooogaaaaannn!!!!
Bman what sre your thought son the TLT spike today ??
cause for concern ? armageddon ??
ummmm....did Ben pretty much just say the Fed is a buyer of treasuries? Sir??????????
i guess Bman and I are the only supporters of Ben left
he doin a great job considering the mess mr G left him
jim what up TLT...no clue you say...that will be 6k, have a nice day.
"Bman what sre your thought son the TLT spike today ??
cause for concern ? armageddon ??
i guess Bman and I are the only supporters of Ben left
he doin a great job considering the mess mr G left him"
how can anyone make these 2 statements in the span of 6 minutes?...lol
convexity buying.
bigtime prepayment of mortgages coming.
Ben is doing fine. He's obeying me, finally.
Next, I'd like Hank to sell billions and billions of 10 and 30 fixed rate Treasuries and lock in these crazy rates.
reparation...careful what you ask for...see who laughs when a bucket of KFC trades over $600.
Sell Treasuries, buy FNMA+Freddie mortgages.
You have been buying TIPs, right Frosty ?
my tax loss selling is over - saved me big $$$.
now I have to be careful on the re-buys to avoid the wash sale trigger.
no Obama rally today ... is the honeymoon over ?
ya....that beaver pick was atrocious
i sure hope the beavers get matched up with Rutgers in a bowl.......the scarlett knights will crush them
Meredith....MVP for 2008...no question about it.....
David Tice a close second...
I see Meredith the Marionette is out on queue from her masters.
uncle bent nose a big meredith fan...wristed tied k-bar match no question, to the death...get a shovel Mrs B, time to dig a hole.
Meredith is like the rah rah crowd of late 1999 and early 2000 who couldn't see change coming.
Nothing is prices in and the world is ending.
Oh well, at least I have plenty of Spam, gold, MREs, ammo, etc.
In January sometime the propaganda machine will turn around - the Obama bull market to commence.
To paraphrase Patton as the beginning of the Bulge, let the befer bears knock it down to 600 - they'll be so short by then, the rally will kill every bear beefer that exists.
And the regulators will kill the rest of them.
Good riddance.
turn the clock back to 1982.
"who couldnt see change coming"
uhhh Bunkerman, are you drinking the Obama kool aid sir?
early MVP move I see...long week indeed.
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