The REAL reason Ford and GM will not be allowed to fail, page 1

posted on Nov, 21 2008 @ 04:23 PM

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This is enlightening and at the same time frightening.

If 9 entities fail then all CDO's ( trillions of dollars) have to be transferred to the banking system

Read the article for full details. I can't really explain it in a summary.

It is now getting very interesting. The three Icelandic banks have defaulted, as has Countrywide, Lehman and Bear Stearns. AIG has been taken over by the US Government, which is counted as a part-default, and Freddie Mac and Fannie Mae are in “conservatorship”, which is also a part default – a 'part default' does not count as a 'full default' in calculating the nine that would trigger the CDS liabilities. Ambac, MBIA, PMI, General Motors, Ford and a lot of US home builders are teetering.

If the list of defaults – full and partial – gets to nine, then a mass transfer of money will take place from unsuspecting investors around the world into the banking system. How much? Nobody knows, but it’s many trillions.

article

Ian McLean

posted on Nov, 21 2008 @ 04:48 PM

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Reuters has an interesting write-up on this today:

www.forbes.com...

LONDON, Nov 21 (Reuters) - Default losses in the roughly $600 billion synthetic collateralised debt obligation (CDO) market, after jumping from zero to $23 billion in a month, are likely to multiply as the economy slows.

Synthetic CDOs are bundles of between 100 and 150 credit default swaps (CDS) -- bets that individual companies will honour their debts -- that have been sliced into tranches based on degree of exposure to defaults.

As the credit crisis develops into a downturn, even buy-and-hold investors in the low risk AAA tranches of CDOs are reassessing their vulnerability to downgrades and defaults.

Recent high-profile failures led to seven CDS auctions from Oct. 6 to Nov. 6, resulting in realised losses in the synthetic CDO market of $23 billion out of $584 billion in total net notional value, Citigroup (nyse: C - news - people ) credit strategists calculated.

Please visit the link provided for the complete story.

Anyone have a link to the current Fitch's synthetic index list?

Here's some companies with high exposure in CDOs:

CIT Group
Radian Group
Macy's
MBIA Insurance Corp.
AIG
International Lease Finance Corp.
PMI Group
MGIC Investment Corp.
Ambac Assurance Corp.
Financial Security Assurance Inc.

venividivici

posted on Nov, 21 2008 @ 06:01 PM

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The ghost of Michael Miliken haunts Wall Street 20 years later.

Milikin and Drexel were the ones that invented CDO's and then a team at JP Morgen started packaging them as credit default swaps more recently. The bill that explained these complicated instruments was 11,000 pages and Clinton signed it into law. I bet noone in congress ever read the bill !!

Then, some shysters decided to package a bastardized version called synthetic CDO's and sold then to unwitting companies. The shysters created phoney companies in the Caymans and shopped the product around.

One bank sold them and another sold insurance against them.

Becuase this game is unregulated nobody knows how much is leveraged but once the number of failed companies reaches 9, banks start calling in t_javascript:icon('

')heir insurace which will decimate the economy but make the bank even moe powerful and rich.

Anybody think there is a conspiracy against these companies to fail by the banks?

THe recent congressional hearings of the Detroit 3 was fake. Congress knows the American public is fed up with bailouts so the big 3 were the scapegoats ( for now).

I think the banks have Congress and the Whitehouse black mailed. Mr Paulson is entirely complicit in this conspiracy/blackmail. But he will fade into the background as the new administration comes on board in January.

Heads need to roll before Paulson disappears.