Bob'29

Lehman CDS Auction Ends, Now What?

This highlights an important aspect of the current market crash. The Fed underestimated the effect of not bailing out Lehman. In short hind sight this was a huge error. With the collapse of Lehman Brothers the insurers that guaranteed its bonds needed to come up with enormous amount of cash. These insurers held very large equity and commodity positions that they needed to sell at any price to come up with their insurance promises to Lehman bond holders. This is quite possibly many times greater than the hedge fund liquidations. There have been suggestions that the U.S. government buy commodity futures to stabilize the market, as the commodity crash will effect the U.S. agricultural production in the immediate future.