Thursday, March 05, 2009

Death by Credit Default Swap

How can CDS and naked short selling be employed to destroy publicly held companies for profit?

Put your thinking cap on and read this ...Thwarting Debtors with Credit Default Swaps. Then ask yourself that classic question, "cui bono?"

The players: hedge funds who buy the CDS, short the stock, and hope to score; their enablers in the media and pools of foreign capital; the investment banks, who sold "protection" to the hedge funds thinking it was easy money-- after all, these big companies wouldn't default in isolation, in a thousand years, let alone all together: never happen! -- plus, bankers can prop them up (now you know why they're dropping like flies, sports fans); and various and sundry accomplices, both witting and un-.
In that last category, we have to mention the US regulatory agencies who appear to be as focused as the proverbial blind pig, the Treasury for taxing all future generations of Americans to raise trillions of dollars to meet the margin calls the banks need to make on their CDS contracts (that is, payments to their counterparties, the hedge funds, et al).

The subject is complex and, given the average person's inability to balance his checkbook, it's unlikely that the truth will ever be understood widely, even if it ever is ultimately discovered and reported.


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