CreditTrader

When Hedges Fail

Hey Felix, love your stuff (though think Walnut Creek/East Bay can be beautiful!) - wanted to get your opinion on the UBS/BX deal. Seems to me like they are doing nothing but the old super senior play. Pool up crappy loans, sell BX first-loss piece (at a discount), and then lend them the rest - nice bit of Basel II arbitrage (lowers capital coz first loss is gone) but the risk remains and the loan terms (we don thave them) must have been spectacular for BX to take this...also check out the Fed's lending activities in the last few days...and the US brokers are spiking in CDS land...keep up the great work.