Article Image Donna Hancock

Letters to the Editor • Stock Market

MSM says nothing to worry about while the market says Credit Suisse is screwed

In 2008 after the Lehman collapse insurer AIG had to pay out the CDS contracts to whom had insured against failure of Lehman to pay their bond holders interest. The problem is with Credit Default Swaps is that anyone can get an insurance against this failure. As an example 1000 people could insure your house against fire and if it burned down instead of paying only you they would have to pay 1000 people. After the derivative blowup of MBS and CDO in 2008 AIG had to pay thousands of "insurance holders" and went bust and had also have to be bailed out. Now the price to pay for this insurance is getting sky high as investors see Credit Suisse bankruptcy being near. We got to remember that Lehman CEO came out and said that Lehmans balance sheet was strong just a few days before they declared bankruptcy and 2008 GFC was underway. Now since I've posted that chart shit is really hitting the fan as MSM says nothing to worry about while the market says Credit Suisse is screwed

Credit Suisse five-year CDS fall sharply as nerves subside | Kitco News