A couple of local faves figure in Gretchen Morgenson's NYT front-pager about credit default swaps, another huge (2x the size of US equity markets) piece of the financial world about which we may have to learn in the near future.
BAC holds $1.6 trillion-with-a-T worth of these things. AIG's problems in valuing them led to its recent woes.
So why is the role of bond insurers not mentioned in the article?
Posted by: Robert Grenier | Feb 17, 2008 at 10:48 AM
More on that here.
Posted by: Ed Cone | Feb 17, 2008 at 11:33 AM
16% of the 45 trillion CDSs are in CDOs. That's 7.2 trillion. But Bill Gross at PIMCO says that historical losses approach 1.25%, thus his projection of 250 billion. When issued a month ago, 250B seemed a bit much. It may, in fact, have been terribly conservative.
Posted by: Fec | Feb 17, 2008 at 12:18 PM