Lockstep Investing

Blackmont Analyst: More Counterparty Credit Risks at CIBC

Once the CDOs were sold at 22 cents on the dollar Merrill based on Merrill's own financing decided monoline hedges were worthless anyway. With the transfer of ownership of the CDOs to Lone Star, Merrill does not need this worthless paper on it's books as a nomimal hedge to claim a reasonable "net exposure" in their quarterly reports.

I wonder what other I-Banks are hiding behind worthless monoline CDO hedges that have no chance of paying up? The market has said that Lehman is next in line to try this balance sheet trick. I just wonder how the accountants at these firms sleep at night.