<<Being among those who have to shell out $190 billion is enough to give other institutions a powerful push in the direction of insolvency. For this reason alone, the US Treasury is facing a serious choice: use taxpayer money to reward speculators or try to limit the damage. One possible avenue would be to demand that those who have bought protection actually prove that they held Lehman debt, and pay them, but refuse to pay those who had speculated. This could be a politically attractive way out of an interesting moral dilemma. >>
this is totally retarded!! all holders of the swaps should be paid out, debt holder or not. Suppose some people wanted to short the stock through the CDS, so what? Is it any different than a put option or shorting the stock outright? There will be major lawsuits unless everybody is paid.
If holders of the CDSs spread false rumors which can be proved, that's a whole different story.
In response to the above, let me clarify.
In the event that a AIG issued a CDS to a purchaser who did not possess the covered security, it is doubtful - unless an internal fraud was commited - that AIG would have been knowledgable. An issuer such as AIG only tranacts with security owners - This would, of course, be contractually stipulated.
This is not to say that parties are not holding AIG issued CDSs without the associated security - No doubt such parties exist. However, I am sure that, at this point, they will be happy to go quietly into the night.
It is true that alot of the Lehman Bros. CDSs were owned by speculators. However, it is doubtful that any of them expected to have their positions spotlighted. Currently, I believe that the Lehman CDS holders that do not own the underlining debt securities are quietly trying to negotiate a way out of their situation - They will probably settle for a fees paid plus interest deal and a non-disclosure agreement.
CDSs were risk plays. the risk/reward must be honored if all instances unless there is tangible evidence of illegal activity
a blogger on asian times that suggests something to the contrary is completely wrong
all CDSs will be honored today (assuming there is sufficient capital), and any cases arising out of alleged impropriety will be addressed in the next several months/years if these alleged cases do, in fact, exist.
if i was holding stock in AIG i, too, would be hoping that this blogger's fairy tale were somehow true.
you can punish people for speculating unless there was something (tangible) that was illegal
we are all speculating in one form or another. who are you (previous posts) to determine what is acceptable speculation?
Where do you think Bush&co. got all the money for these state of the art computer agencies for NSA and homeland security dogs sniffing our bedroom matresses through their god damn mainframe work of art? Again, I have alot of hate for this govnt more now than any middle east terrorist.
There is contract here, you can't just bail from that! As long as the contract is not illegal no matter how unethical, you are commited to meeting your obligation, simple as that. Lets get real here folks!
IRONY?? Comparing the CDS debacle with purchasing stock is ridiculous at best...
Shortsellers were using these CD's to call attention to Lehman's prospects for survival...CNBC was too glad to oblige (see Cramer videos about his own use of CNBC reporters to influence stocks...on youtube) with reports that these CDS purchasers MUST be knowledgeable and that LEH must be in deep doodoo....
Guess what?? Like yelling FIRE in a crowed theater, this b.s. WORKED.... An already damaged Lehman now becomes critical-condition patient...
CDS is to protect Debt-assets... Just like you are not gonna takeout life insurance on my life and encourage all to do it and then if I die all of a sudden from stress of sooooooo many betting on my life's end, it would be considered criminal, my friend...
You are not even close with your comparison...
If I buy stock and the company goes under, so be it...IF I shorted and the stock goes to zero, so be it...
BUT, I do either and use unethical means to game the system, I deserve JAIL!!!!
Very good news for AIG
<<Fears about Lehman CDS deadline seen as overstated
The $55 trillion market has created concerns that it may pose systemic risks as the private nature of the market makes it impossible to know who holds what risk, and how large any exposures are.
Part of the worry about the Lehman swaps is the $400 billion in insurance outstanding, although this number overstates the amount of money that will actually be transferred.
The Depository Trust and Clearing Corporation, which clears the vast majority of trades in the over-the-counter market, said this month only $6 billion may actually change hands.
This is because large players in the market, such as dealers and some hedge funds, have both bought and sold protection, subsequently taking both gains and losses on Lehman's default that will offset each other.
For companies with net exposure to pay out protection, much of the pain of settling the swaps has also already been taken.
"If you were the seller of protection, you had to pay collateral and that collateral was changed on a daily basis, based on where Lehman's bonds were trading," Mahadevan said.
so you are citing the opinion of an asian times blogger as fact?
desperate times require desperate measures...
while you are busy promoting lies, the markets are busy digesting facts and selling off...
AIG will need to pay for ALL of their CDS on lehman, as well as their responsibilities on other BK companies...