waaaja

What Obama Needs to Know about Tim Geithner, the AIG Fiasco and Citigroup

Yes they are bets with bookies. The swaps work like this they are packaged and sold but the seller guarantees their value.So if the person with the mortgage in that swap defaults the seller still will pay. To the buyer its a no lose deal. However the seller who made the guarantee did not put any money in reserve to cover the loss. That would be insurance and regulated but that is why it is called a swap - no regulation. Now most of the swaps were bad to begin with which is why the guarantee was necessary. It is all smoke and mirrors and like the article says a house of cards ready to fall.


On Nov 26 12:05 PM Cactusbrush wrote:

> "Remember, only a small portion of these positions are actually hedging
> exposure in the form of the underlying securities. The rest are speculative,
> in some cases 10, 20 of 30 times the underlying basis."
>
> I don't quite understand this bit, perhaps you could expand on how
> this actually works. I get that a big part of the problem was people
> buying insurance on the Titanic from people on the Titanic. But are
> you saying that most CDS were not insurance at all, but actually
> bets with bookies on whether the Titanic would hit an iceberg or
> not? Does that make them like the mother of all naked shorts?

What Obama Needs to Know about Tim Geithner, the AIG Fiasco and Citigroup

According to an article by CNN Money.com Sept 2 2008 JPM is not invested in the swaps. Dimon saw it coming a few years ago. However with there recent additions I think they might now be knee deep. The article was very good and worth a look.


On Nov 26 07:22 AM SWRichmond wrote:

> Well written and very very informative. You stopped short of suggesting
> that the financial engineers want to hang on to the CDS model as
> long as Treasury is willing to loot the taxpayers to pay for it.
> I'd love to have a look at JPM's CDS book.