Chris Burford writes about credit default swaps below: I thought I would share that in my capcaity as a bankruptcy lawyer, I listened to today's hearing in the Lehman bankruptcy case, which included an extensive report to the Judge. We represent three different entities who were counter-parties to Lehman on either credit default swaps or power trades. When Lehman filed, most of the counter-parties terminated all contracts and then netted them out. If you determined you were owed money, you sent a demand letter. If you owed money, you did nothing.
Lehman reported today that it is a party to about 1.5 million derivative transactions with over 8,000 counter-parties. The immediate problem counter-parties have is that they provided collateral for the transactions and nobody knows where the collateral is. Lehman doesn't really know because substantially all of the employees with institutional knowledge transferred to Barclays when the brokerage unit was sold. Lehman has hired Alvarez & Marsal (probably the largest provider of financial restructuring services in the world) to staff old Lehman, but it is going to take at least 45-60 days for them to get a handle on the data to provide any information. And once they do get up to speed, they are going to have to go out and hire people with expertise to evaluate all of the swap transactions to reconcile them. Quite the mess and very challenging issues for bankruptcy lawyers and the bankruptcy system. David Shemano --- Original Message--- To: "[PEN Progressive Economics" <[email protected]> From: "Chris Burford" <[EMAIL PROTECTED]> Sent: 10/16/2008 3:00PM Subject: [Pen-l] credit default swap disaster - the dog that did not bark? >> The other worrying problem for the success of the UK financial rescue >> policy, is the mountain of credit default swaps, many of which, Will Hutton >> warned last week, were due to be repaid last weekend. In fact the further >> falls in the global exchanges are mainly accepted as being the result of a >> realisation that the global recession is now manifest. >> >> But Channel 4 TV with the help of Will Hutton haunted us with this spectre >> again tonight. Globally the market in credit default swaps is something of >> the order of over 50 trillion dollars, many of them not unsurprisingly held >> by British Banks like HBOS, which has just needed partial nationalisation. >> >> The UK government is repeating again the mantra about it will do "whatever >> it takes" to support the banks. >> >> More hopefully the EU appears to be setting in place arrangements for >> controlling them on a global scale. >> >> It seems likely that the sociogram that was illustrated on the programme >> (program) about the intimate and incestuous cross holdings in all Icelandic >> financial organisations, is just a microcosm of the incestuous network of >> holdings in the entire anglo-saxon led global credit economy, capable of >> building magnificent castles, betting that there will *never* be a recession >> that the state will not spend its way out of. So when there is what use is >> the network of insurance policies? Isn't it cheaper to concentrate on >> setting >> up soup kitchens than to pay off each one of the owners in this chain mail >> system? >> >> If these are really just castles in the air, would it not be easier for the >> leading financial states in the world to call them all an elaborate house of >> cards, and utterly worthless. Thereby letting the states of the world >> concentrate on the real and current economy? >> >> I would be interested to know whether other list members think that the >> collapse of these 50 trillion dollar structures will cause an unimaginable >> further lurch into profound depression or whether they are just worthless >> air, and could be blown away. >> >> I do not believe much in conspiracy theories, but the political >> intelligentsia of the establishment, including its loyal reformers, has a >> vested interest in not telling us the full truth. >> >> Chris Burford >> >> >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l >> >> >> _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
