We need to talk. How likely is this? If the US defalults what is the next step? When are the 2009 mortgages due, in what month?

Jeff

Entertaining to watch. Thanks for sharing.

Google UNIFIEDMARKETS

Our goverment made this legal by passing bill hr 4541 in 2000.This betting was made illegal after the 1929 crash!!! WHY ARENT THE PEOPLE SCREAMING FOR TERM LIMITS!! HOW MUCH ARE WE WILLING TO BE SCREWED!!!

Well explained. So greed triumphed over prudence. But there is worse to come - defaulting A plus and jumbo mortgage loans (due 2009). And VIEs. And many remaining non subprime SIVs. As all this unwinds one may find it is more money than the Fed, or available world loans to it, can cover. Then entire US becomes bankrupt, as with Iceland, but no monetry authority in the world has anywhere near enough money to bail them out. Best then is to really give up? Game over ….

1984 indeed.

you know what your video is more awesome than i thought. i completely understood fast money tonight. except for the part where they went into the g7 conference for injecting liquid cash directly to non-financials. whatever that means.

i understood and liked the video, but you do make leaps in your vocabulary that one has to overcome and infer upon oneself.

good video , puts it in “plain speak”

Awesome video!

Dude you are one clever fella!!! keep up the good work

Excellent vids…a great resource!

The notional value could quickly compress to a much smaller sum as settlement occurred, and it is the general case that the insurer’s risk is limited to a percentage of the underlying asset’s face value rather than the entire accumulated notional value of the problem. Usually, it is the cash flow vis a vis a bench mark cash flow which is at risk rather than the full default loss.

Thank you. I greatly appreciate this thread.

Thus it would seem that when writing CDS insurance on an underlying RMBS or a CDO the initial CDS is left open in its notional value even when it is offset or covered by an equivalent opposing position. At the same time the writer of the new and opposing position now has an added open notional value. It would not take long for these open layers to become an astronomical total.

As to the putative $50T in CDS reported to have been written, shouldn’t we need to remember that this is the notional value? CDS’s are an over the counter derivative. As such they are not subject to offset as are futures or exchange traded options.

reported on NPR 10/4/08 on This American Life that for the taxpayers to purchase this huge, stinking pile of garbage assets and get nothing in return is certainly possible.

However, someone in both Sen and House has added language to the bailout bill to give the Treasury Secretary the OPTION of requiring stock in the failed banks, along with the worthless assets.

Sort of like yes, we’ll buy your bad debts, but we also get a share of your business.

Q: How do we force them to do this now?

oh my god, it’s really really great, thank you very very much

Is my understanding correct that there are no GAAP/FASB disclosure requirements for these contingent CDS liabilities?

great videos, great supplement to my schooling. why wasnt it made this easy in high school? thank you.

This is an awesome segment. In fact all of them, the CDO, MBS, Bailout Series are amazing. You are doing a great public service by explaining this in layman’s terms. I will recommend this to all my family and friends to understand this mess the corps have gotten into. I will also petition my congress reps to avoid bailing out these fat cats.

Thanks Sal for Explaining the Credit Default Swap.

Wow. The most comprehensive explaination I’ve seen. That’s scary, I almost wish I remained ignorant of learning that.

I haven’t watched this finance series..But I gotta say, you are the man..You harbor so much knowledge…

You’re So Great!