GeminiAtlas

Lehman's CDS Mess: Who's on the Hook?

So what happens when the Gov't comes to the rescue of the banks which might have to payout on 21 Oct? Mr. Paulson will recapitalize the banks (to keep them from imploding), but that new capital will go immediately to pay off the CDS "winners." And there the gov't (and taxpayers) will be holding the bag of loser banks which would be fairly anemic due to the payouts. I would hope the winners will gladly lend to the losers some more cash, but for a high interest rates. I hope the players don't see the opporunity for "risk mitigation by giving it to the government." Then there could be rush by the players to put the whole exposure on the government which will kick the can down the road to a worse day of reckoning.
Also, PrudentMan, a term more appropriate for the power brokers would be cronyistic. Capitilistic=free market,