Explain how we'll see 105 again? Okay. I can do that.
Monday 10/6 - settlement date for all CDS bets related to FRN/FME. Friday 10/10 - settlement date for all CDS bets releated to LEH. Thrusday 10/23 - settlement date for all CDS bets related to WM.
These three days, and the fear that every CDS player has that they'll get caught up in the wave of defaults, is at the heart of why we currently have a siezure in the credit markets. Estimate on the FRN/FME bets to clear are around half a trillion. No estimate exists for LEH, cause the books were so opaque. Also, all of LEH's hedge fund clients in London have almost zippo access to their assets that LEH was serving as primary broker for.
Say you're a bank or a broker or a hedge fund, and you've been playing in CDSs. You might not even have any paper related to FRN/FME. But some of the counter-parties you dealt with *do* have exposure to FRN/FME. Say they go under. Then *your* coverage by those counter-parties drops to zero, zip, nadda. You might get wiped out by FRN/FME, having never even have placed a bet on them. Feeling the sphincter tighten a bit? Understand now why banks refuse to lend ot each other, or their commercial customers?
The derviatives market estimates range from over $60 trillion dollars up to over $1,000 trillion. All interweaved together, with the same players putting bets down on everything they could imagine someone would take a counter position on. It is at tremendous risk for having vast swaths of players taken down my *any* major "credit event", and here we have three of them happing this month.
Oh. Any that fail will in turn cause further "settlement dates" to be scheduled out in Novemeber. And then those that fail then will settle in December, and on and on and on.
What part of CDSs do you not understand? Do some bloody reading.
The mark to market on crap mortgages is like focusing on your transaction fee of $10 per trade, when you've got a margin call for $10,000,000 looming on the horizon. Oh, yeah, do keep focusing on that cost per trade overhead.
The bill *isn't* going to cause banks to start lending to each other again. They will remain petrified for weeks, maybe months. Businesses world-wide will suffer, as will individuals. It will be a miracle if they don't have to surround banks with cordons of military riot police to keep citizens from burning their buildings across the country. The banks may not be allowed to fail, but they'll have to become permanant zomibe banks, wards of the state that protects them. If that's your idea of a good investment, then more power to you...