And then maybe you wondered what triggered the market to fall like a turd in a churn yesterday....
Well, if you thought the market was bad yesterday, look out for today.......
It's gonna be grim, trust me. Today is the day they have to pay for the Lehman's derivatives.
Get a better understanding of why the banks are not lending any money right here
Tomorrow, the auction for Lehman's credit default swaps will be held, and the final result will probably be that that holders of credit default swaps will have to pay around $360 billion dollars (see below). That's for Lehman alone. Derivatives exposure due to other failed businesses is even higher.
This is why Wall Street firms and banks have been hoarding cash. As the Financial Times wrote on October 7th:
Banks are hoarding cash in expectation of pay-outs on up to $400bn (£230bn) of defaulted credit derivatives linked to Lehman Brothers and other institutions, according to analysts and -dealers.
These contracts will be settled on Friday [October 10th], and with the recovery value on Lehman bonds currently estimated at about 10 cents on the dollar, the pay-out by banks and other sellers of credit protection on Lehman could reach a gross $360bn.
And now, I would encourage you to read this story. It is LONG but it's very insightful, as it explains the tawdry progress of the mortgage crisis, who promulgated it, and how it evolved. After you read this, you will know who to blame for the mess we are in right now.
They Warned Us About the Mortgage Crisis
State whistleblowers tried to curtail greedy lending—and were thwarted by the Bush Administration and the financial industry
No comments:
Post a Comment