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Farce Is Complete As ISDA Finds 50% "Haircut" Is Not A Credit Event

Tyler Durden's picture


And, as expected, here is ISDA with the most farcical of decisions. From Reuters: "A new voluntary deal for holders of Greek debt to accept deeper losses is unlikely to trigger a 'credit event' that would cause a payout on default insurance, said a top lawyer at the International Swaps and Derivatives Association. Greek bondholders face losses of 50 percent under a plan to lower the country's debt burden and contain the euro zone's long-running debt crisis. The aim is to complete negotiations on the package by the end of the year. But because participation in the deal is voluntary rather than forced, it would typically not trigger payment on CDS contracts. "As far we can see it's still a voluntary arrangement and therefore we are in the same position as we were with the 21 percent when that was agreed," said David Geen, general counsel at derivatives body ISDA, referring to an original deal proposed in July that involved smaller bondholder losses. "The percentage (of losses), as far as the analysis for CDS purposes goes, doesn't change things. typically a voluntary arrangement won't trigger the CDS." Geen said the final decision on whether a credit event has occurred rested with the ISDA determinations committee, which would consider the issue when requested to do so by a CDS market participant." The fact that the decision is "voluntary" under duress from an entire political system which realizes its ponzi structure is collapsing is seemingly irrelevant. Luckily, the market is not all that stupid and the preliminary reaction is as expected, and to paraphrase Willem Buiter, "Failure to trigger Greek sovereign CDS when economic logic indicates this ought to occur would likely be detrimental to financial stability." But that's irrelevant. The EU has kicked the can down the road. Now it is literally a race for the fade to discover who is first to realize that as Zero Hedge and now RBS chimes in, "the EFSF is still too small to restore investor confidence."


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Thu, 10/27/2011 - 06:52 | 1816415 bigwavedave
bigwavedave's picture

Green bitchez. Bwahahahaha

Thu, 10/27/2011 - 07:04 | 1816452 paarsons
paarsons's picture


It may seem like a joke.  But it's a start.

How much of a haircut did Goldman have to take?

Angie Merkal has balls.

Let's see where this leads before we shit on her head.

Thu, 10/27/2011 - 07:08 | 1816463 Motley Fool
Motley Fool's picture

The Farce is strong with this one.

Thu, 10/27/2011 - 07:55 | 1816551 Comay Mierda
Comay Mierda's picture

what the hell is taking the greeks so long to realize they just got royally PHUCKED?

Thu, 10/27/2011 - 08:24 | 1816622 WonderDawg
WonderDawg's picture

Pretty amazing PR campaign to make this a market positive. Weeks and months of no solution, then suddenly, "We Have A Deal!" and everyone cheers. Had it been something like weeks and months of no solution and then "Greek Bondholders Forced to Accept 50% Losses!" maybe the market reacts differently.

I think this will be the last pop to this rally. The ripple effects are yet to be felt, and when the hopium wears off, we get the next leg down, and it will be a doozy. It will be interesting to see just how much higher the markets will rise, and for how long. My bet is this initial pop will be most of the rise and it buys maybe another two weeks before the markets roll over. But that's just me. I got off the hopium a couple of years ago.

Thu, 10/27/2011 - 13:10 | 1817779 techperson
techperson's picture

Probably the fact that they were just forgiven 50% of their government debt. Sweet!

Mon, 11/14/2011 - 21:00 | 1877701 haibop
haibop's picture

definitely it is!

Sat, 05/05/2012 - 12:50 | 2399433 haibop
haibop's picture

agree how to

Thu, 10/27/2011 - 07:18 | 1816464 jm
jm's picture

The only way this determination was made was if dealers were in on the joke and had a short basis trade on.   

None of these guys lost a $%#@ dime.  Except guess who.


Thu, 10/27/2011 - 07:45 | 1816521 Harlequin001
Harlequin001's picture

Well, according to an earlier post the only losers are the Greek pension funds, and I have no problem whatsoever with that...

Now let's see how long these pension funds take to refuse to eat this 50% loss unless everyone else does or at least takes some, and throw the whole lot into turmoil again. Until we then have an actual default...

Either that or I can see one or two Greek pension fund managers running around in fear of their lives...

Thu, 10/27/2011 - 07:50 | 1816539 nedwardkelly
nedwardkelly's picture

Yeah is this a case of the politicians getting together and agreeing that all the bondholders will 'voluntarily' agree to the haircut, without having actually had any of the bondholders voluntarily agree to anything? I really can't imagine that did a poll of anyone that holds greek debt to find out how they all felt about it...

Also, aren't we talking major moral hazard here now? If you're portugal, or Italy or Ireland, Spain etc... Wouldn't you be sitting up saying "Party on wayne, if our debt gets out of control we'll just get everyone to volunteer to cut it in half!!". For that matter, who the FFFFFF would buy EU government debt now?!

Thu, 10/27/2011 - 08:11 | 1816592 jm
jm's picture

What I don't get is that the same people that want EU banks to boost tier 1 capital by <who knows how much in euro terms> are the same people that seem instrumental in destroying their hedge book.  Much more, they have introduced huge moral hazard into all european government debt.

This is more than stupid. More than "Trichet stupid".  This is stupid on a whole new level.

Thu, 10/27/2011 - 07:46 | 1816531 nedwardkelly
nedwardkelly's picture

How much of a haircut did Goldman have to take?

I'm just not following...

Supposedly it's voluntary. Why would anyone that holds the bonds, plus CDS, volunteer on a 50% haircut with no credit event? I could see why someone without insurance might volunteer for the haircut (vs complete default) but even that's a stretch.

The 'volunteer' aspect of it all just doesn't seem to make any sense. Or is this similar to the way we all volunteer to have our balls groped when going through airport security?

Thu, 10/27/2011 - 07:49 | 1816538 Translational Lift
Translational Lift's picture

ISDA don't get to trigger the default until there is a 99.9% loss.....NEW RULE!!  Sucks to be you!!

Fri, 11/11/2011 - 00:26 | 1868944 haibop
haibop's picture

this is no funny! memory foam mattress

Thu, 10/27/2011 - 08:11 | 1816549 Al Gorerhythm
Al Gorerhythm's picture

Insurers denied home owners in Australia flood damage payouts, because the damage was caused by rising waters downstream, not from torrential rainfall in their area.

Insurance is a gyp. They make the rules up on the fly to suit their bottom line. In this case it seems that the banks will take a 50% haircut on their bonds and be paid for the losses by the ESSF, that prints the money and taxes the masses through inflationary dilution.

What I don't get; where does a group of bankrupt nations get the money to pay themselves. If euros don't emanate from the ECB, then where do they come from? Tokens in a cornflakes box?

Mon, 01/30/2012 - 08:05 | 2108995 taxi952
taxi952's picture

Your beeing a little hard on those poor girls

bloons tower defense 5

Thu, 10/27/2011 - 06:54 | 1816421 Mongo
Mongo's picture

Because voluntary has been redefined as mandatory

Thu, 10/27/2011 - 06:57 | 1816432 HD
HD's picture

The difference between sex and rape...

Sat, 11/19/2011 - 14:35 | 1894309 haibop
haibop's picture

oooh right! walk in freezer

Thu, 10/27/2011 - 07:00 | 1816442 What does it al...
What does it all mean's picture

Is it truly "mandatory"?  I mean... If I am a bond holder and I don't tender, do I get my coupon and principal. 

A question of procedure.

Thu, 10/27/2011 - 08:01 | 1816568 Translational Lift
Translational Lift's picture

"I mean... If I am a bond holder and I don't tender, do I get my coupon and principal."

Ask Obummer and see what he says!

Thu, 10/27/2011 - 09:36 | 1816899 Iam_Silverman
Iam_Silverman's picture

"If I am a bond holder and I don't tender, do I get my coupon and principal. "?

That is a good question.  Consider though that the banks willingly taking a 50% haircut have now just set the new market value for the bonds you hold.  No problem if you are a bank - just mark to model (holding to maturity and being made whole).  Not so good if your portfolio has to mark-to-market.

Also, since the bank holders of the Greek bonds voluntarily took the haircut (so they can get cash infusions from the EFSF), the CDS covering those bonds have not been triggered.  Truly buggered, those who are holding Greek bonds and not a European banking institution!

Thu, 10/27/2011 - 06:55 | 1816422 Karl Tashjian
Karl Tashjian's picture

Pretty good joke.

Thu, 10/27/2011 - 08:23 | 1816617 Al Gorerhythm
Al Gorerhythm's picture

So you think it's funny, eh? Why you little............

Sat, 11/26/2011 - 11:39 | 1915082 haibop
haibop's picture


Sat, 03/10/2012 - 21:25 | 2244025 haibop
haibop's picture

smart... Inteligator

Thu, 10/27/2011 - 06:56 | 1816423 Fips_OnTheSpot
Fips_OnTheSpot's picture

Hilarious - so who buys EFSF-CDS in such environments then?

Thu, 10/27/2011 - 06:58 | 1816436 Ghordius
Ghordius's picture

nobody with two brain cells

BAN CDS (Again)

Thu, 10/27/2011 - 07:00 | 1816443 Fips_OnTheSpot
Fips_OnTheSpot's picture

Oh right.. CDS are evil and banned. Dummy I am.. thanks for pointing that out. Now pass it to Merkozy :)

Thu, 10/27/2011 - 07:17 | 1816457 Ghordius
Ghordius's picture

Oh, right, what a nonsense, MegaBanks work in your interest by improving on the economy with exciting financial innovations.

Your sarcasm is reaching for some target I simply don't see, explain, please...

meanwhile BAN CDS, not only naked CDS, just for starters...

Thu, 10/27/2011 - 07:40 | 1816520 magpie
magpie's picture


But who could survive the "true" rates of interest.

Thu, 10/27/2011 - 07:48 | 1816535 Harlequin001
Harlequin001's picture

you mean the ones where I get a reasonable rate for the risk of lending my money?

Thu, 10/27/2011 - 08:15 | 1816602 Calmyourself
Calmyourself's picture

I said it yesterday.  No law will be followed civil, contractual or criminal.  No national custom or sovreignity will be allowed to stand in the way of this ponzi the only trigger is hunger, trade and prepare accordingly. 

Thu, 10/27/2011 - 13:13 | 1817802 techperson
techperson's picture


Tue, 12/27/2011 - 14:38 | 2014187 haibop
haibop's picture

smart move. get your wife back

Tue, 02/21/2012 - 01:12 | 2180065 haibop
haibop's picture

exactly surveys4income

Tue, 05/01/2012 - 20:59 | 2389821 haibop
haibop's picture

exactly Inteligator

Thu, 10/27/2011 - 09:49 | 1816953 Fips_OnTheSpot
Fips_OnTheSpot's picture

Sorry.. well: They ban CDS (naked for now) - but "invent" EFSF-CDS at the same time. Wasnt clear or '</sarc>' clearly. *picking my nose*

Thu, 10/27/2011 - 06:56 | 1816424 agent default
agent default's picture

So... Buy  government debt and face a potential 50% capital loss WITHOUT the possibility of hedging against it.  Government bond sell off imminent.

Thu, 10/27/2011 - 07:22 | 1816486 MsCreant
MsCreant's picture

"Remember that insurance policy you bought? Well we are ruling that you are not allowed to collect on it. We pick the winners and losers any time we like because we are your government. Thanks for playing though. Tee hee."

Put these people in children's clothes and let them play board games with each other, they are a menace for the rest of us.

Thu, 10/27/2011 - 07:32 | 1816508 agent default
agent default's picture

These spoiled brats just make the situation for Italy and Spain much worse.  They are essentially legitimizing capital loss with no means of protection, and then they will turn around and whine when spreads begin to widen like crazy.  Government bonds were considered a safe haven in times of uncertainty.  This decision just makes them risk asset number one.  Lets face it, you have to be an extremely crappy stock/commodity picker to suffer a 50% loss with no possibility of recovery.  At this point bonds have almost the same risk as derivatives trading.

Thu, 10/27/2011 - 07:47 | 1816534 GeneMarchbanks
GeneMarchbanks's picture

'They are essentially legitimizing capital loss with no means of protection, and then they will turn around and whine when spreads begin to widen like crazy.'


Sat, 12/24/2011 - 03:22 | 2008933 haibop
Thu, 10/27/2011 - 07:00 | 1816425 HD
HD's picture

Of course it isn't a default. That would have been bad. Bad is not good. Only good can happen...and happen it has. Hopium is powerful stuff.

Thu, 10/27/2011 - 06:56 | 1816426 spz_trader
spz_trader's picture

I am surprised they wer able to levitate at these levels with the EFSF woefully inadequate. 

Thu, 10/27/2011 - 07:00 | 1816427 Cognitive Dissonance
Thu, 10/27/2011 - 07:03 | 1816450 GeneMarchbanks
GeneMarchbanks's picture

No refills.

Thu, 10/27/2011 - 07:15 | 1816473 Cognitive Dissonance
Cognitive Dissonance's picture

Abiogenic government debt. It naturally refills the coffers......which explains that constant sucking sound.

Thu, 10/27/2011 - 07:01 | 1816428 Ghordius
Ghordius's picture

"the EFSF is still too small to restore investor confidence"

the blasted EFSF is just there so that the EUR can continue to be the second ugliest currency in the contest

if the structure of the EFSF is of ugliness, it's mainly because it's modeled after the MegaBanks and holds them a mirror...


Thu, 10/27/2011 - 06:57 | 1816433 Catullus
Catullus's picture

And now you know: there is no SHTF insurance. That bet never pays out.

Oh, and those of you holding on to the CDSs as a proxy hedge to other debt, you're no longer hedged.

Not sure why the CDS market on sovereigns doesn't collapse on something like this.

Thu, 10/27/2011 - 07:05 | 1816455 Everybodys All ...
Everybodys All American's picture

It probably will.

Thu, 10/27/2011 - 06:58 | 1816435 BW
BW's picture

No CDS default, sell bonds.

Thu, 10/27/2011 - 07:25 | 1816491 MsCreant
MsCreant's picture

Refuse to support ALL GOVERNMENTS, sell bonds.

Tue, 02/21/2012 - 23:13 | 2183229 haibop
haibop's picture

may be not so fast - for your own benefit. tw

Thu, 10/27/2011 - 06:59 | 1816437 Help Is Not Coming
Help Is Not Coming's picture

Here is an idea: Buy a Greek Bond and don't volunteeer for the haircut. When Greece goes to default on your bond state that you're willing to let the EFSF buy it for full face value and not a penny less.

Somebody, somewhere has got to be working this angle. (Caveat: I don't really understand all the nuances of bond trading but this idea is the first thing that came to mind when I read the story.)

Thu, 10/27/2011 - 07:07 | 1816462 topcallingtroll
topcallingtroll's picture

If greece and the banks quietly buy up the remaining bonds, or even the CDS, then they can default on the rest, no problem.

Thu, 10/27/2011 - 06:59 | 1816438 disabledvet
disabledvet's picture

ridiculous. the size of Greek CDS is deminimus. This is all about the "linkages" between European banks and the connections thereof to their respective "leaders." This truly is "kick the can down the road" as it solves absolutely nothing...although it does appear to represent a direct transfer of wealth from Europe to New least today. If I were a European i'd be buying gold...provided i had a job/money/whatever. That's just the generic take to me. I think an interesting sidebar is "why does Europe export gasoline to the United States?" That's always seemed odd given that gasoline is WAY more expensive over there than it is over here--and the USA certainly doesn't have a shortage.

Thu, 10/27/2011 - 07:00 | 1816441 Boilermaker
Boilermaker's picture

So, in other words, they, the banks, the fed, the treasury, the IMF, and rest of the BIG SWINGING DICKS can do WHATEVER THE FUCK THEY WANT TO DO.  And you and I can't do a fucking thing about it.

Thu, 10/27/2011 - 07:02 | 1816446 topcallingtroll
topcallingtroll's picture

Surely you didnt just now figure that out?

Thu, 10/27/2011 - 07:07 | 1816459 Everybodys All ...
Everybodys All American's picture

It has never been any more blatent.

Thu, 10/27/2011 - 07:07 | 1816460 HD
HD's picture

True. But look on the bright side. At least they can't shoot rubber bullets at your face through the internet...yet.

Thu, 10/27/2011 - 07:21 | 1816484 Boilermaker
Boilermaker's picture

Ahhhh, the silver lining.  Thanks!

Thu, 10/27/2011 - 07:19 | 1816482 Motley Fool
Motley Fool's picture

You can buy gold.

Thu, 10/27/2011 - 07:21 | 1816483 Boilermaker
Boilermaker's picture

True, and they can confiscate it in exchange for notes.

Thu, 10/27/2011 - 09:53 | 1816968 Iam_Silverman
Iam_Silverman's picture

"And you and I can't do a fucking thing about it."

Yes we can.  Do something about it, that is.  Just say NO to purchasing government debt - of all flavors.  No more sovereign bonds, no more munis, no more GSE or other agency debt either.  Look carefully at all of your investment vehicles - if they use government debt as a form of offset against more volatile components of their portfolio, dump them now.  Force the PD's and CB's to buy that stuff.  In fact, with the IASD showing their true colors, you might even want to reconsider any bonds in your portfolio - especially if they need CDS to offset any part of their value.  Once the bond market tanks and commercial paper is infected, then you will see more thought given to what these clowns have just done.

Thu, 10/27/2011 - 07:03 | 1816444 topcallingtroll
topcallingtroll's picture

Interesting to see what happens to debtholders who refuse to participate.

I bet greece is willing to trigger small, selective defaults.

Thu, 10/27/2011 - 07:05 | 1816454 wang (not verified)
wang's picture


Thu, 10/27/2011 - 07:03 | 1816449 Sequitur
Sequitur's picture

Unbelievable, in a "of course they fucked more responsible banks" sort of way.

Yet more confirmation gold is the only true safe repository of value. Can't trust currencies, can't trust GAAP accounting by corporates, can't trust any banks (see Dexia), can't invest in bonds, and now you can't trust international contracts, i.e. your insurance is now totally worthless.

System is pure shit. So gold it is.

Thu, 10/27/2011 - 07:23 | 1816488 terryfuckwit
terryfuckwit's picture

dead right when the rules are invented on the fly by the 1% no one gonna play any more... game over and stack your coins and bars.....

Thu, 10/27/2011 - 08:20 | 1816612 tocointhephrase
tocointhephrase's picture

Occupy Gold and Silver Bitchez!

Thu, 10/27/2011 - 07:04 | 1816451 wang (not verified)
wang's picture

futures up 26 - hope they hold till the open, I think moments like this define sell the news

Thu, 10/27/2011 - 07:04 | 1816453 TraderMark
TraderMark's picture

I am boggled that the 'free market' no longer counts in any manner - those who have CDS on Italy or Spanish or Portuguese debt must wonder what's the point.  Any and all hedging has become moot.

Anyhow, another fun Marc Faber interview yesterday on financial entertainment TV - he has a lot zingers in this one along with the normal fare about eventual war, and confiscation of assets down the road by desperate govts.

Thu, 10/27/2011 - 07:11 | 1816468 goldenbuddha454
goldenbuddha454's picture

That's what you get when communists run governments.  Oh that's a little harsh.  I mean socialists.

Thu, 10/27/2011 - 07:26 | 1816492 Ghordius
Ghordius's picture

I disagree, this kind of interventions are more properly fascist, European Style

Mussolini wrote a few interesting articles about how and when the gov is supposed to step into the economy, bash a few heads and get all interests in line again... (I'm not giving kudos)

in the Anglophone countries you are more used to a different style of fascism, the "neo-liberal style", for a better word, where companies are never, ever, rebuked...

Thu, 10/27/2011 - 08:22 | 1816619 tocointhephrase
tocointhephrase's picture

Socialisim leads to Communism, dont be too hard on yourself! 

Thu, 10/27/2011 - 07:07 | 1816458 Kina
Kina's picture

So insurance is worthless. What to do....

Thu, 10/27/2011 - 07:11 | 1816469 Minoan
Minoan's picture

Do not lend.100% safety.

Thu, 10/27/2011 - 08:27 | 1816584 Al Gorerhythm
Al Gorerhythm's picture

That depends on the meaning of what "Is" is. Is is is or is is not is?. That needs to be fully defined. Let's ask ISDA to elaborate , oh, wait a minute, they have already given their opinion? 


50% "Haircut" Is Not A Credit Event.

Is is not is. Is isn't.


Thu, 10/27/2011 - 07:09 | 1816465 wang (not verified)
wang's picture

Carl Weinberg on Bloomberg Radio just now


This is the basis for a Depression

A dark period for Europe

Thu, 10/27/2011 - 07:09 | 1816466 goldenbuddha454
goldenbuddha454's picture

All this is going to do is bring inflows into the CDS market to a SCREECHING HALT!  And by the way, the ISDA will probably determine that the buyers of the CDS's have to continue to pay per the original contracts requirements.  Wow.

Thu, 10/27/2011 - 07:13 | 1816470 Everybodys All ...
Everybodys All American's picture

Credit Default Swaps on sovereigns are totally worthless now.  The fact that ISDA does not see a 50% loss as a credit event is very telling. No amount of spin can now put this one back in the bottle. If you have sovereign debt and think you are hedged guess what you are no longer.

Thu, 10/27/2011 - 07:14 | 1816471 goldenbuddha454
goldenbuddha454's picture

so as a result all inflows of money into backing govt. debt end, today.

Thu, 10/27/2011 - 07:15 | 1816475 Mentaliusanything
Mentaliusanything's picture

Somewhere, some rather unpleasant drug Lords are on the Phone with a clear message.....

"I want my Fucking money back With Interest you Sons of Goth bitches. I stump Up, You banked it and Now....

See you in my court  you Mother Fuckers- Nobody screws with Us

Someones getting a Columbian Necktie for Christmas - blood red to match the season you limp wristed Fairy Fuckers"


Thu, 10/27/2011 - 07:33 | 1816510 cahadjis
cahadjis's picture

+1 for avatar

Thu, 10/27/2011 - 07:16 | 1816477 goldinpenguin
goldinpenguin's picture

AIG should get back into the business!

What happens if someone doesn't volunteer?

The sovereigns get preferential treatment, they get to make the rules up as the game progresses

Thu, 10/27/2011 - 07:18 | 1816481 Boilermaker
Boilermaker's picture

I hope I don't voluntarily have a crash on my drive to work.  State Farm wouldn't have to pay if I intentionally T-bone another vehicle.

Thu, 10/27/2011 - 07:26 | 1816494 AngryGerman
AngryGerman's picture

Basically insurance business par excellence! You have to pay premium, and when it comes to getting something, sorry.

Just transfer this concept ot high-water insurance.

"My home just got flooded. Can I please make a claim?"

"Technically it was not a flood, as you voltarily accepted the water into your house by leaving the door open."

I wonder who was selling all those CDS?

Thu, 10/27/2011 - 07:26 | 1816495 Belarus
Belarus's picture

One huge thing lost in all this is Germany got there way. No money printing. No additional commitments. No bank recaps outside their borders. Everyone gets re-elected. This whole thing just feels like a set-up to give Germany the necessary time to move to the Dmark. No sane person believes "all is fixed." Yet, sure...the can has been kicked:

Now it is literally a race for the fade to discover who is first to realize that as Zero Hedge and now RBS chimes in, "the EFSF is still too small to restore investor confidence."

The markets have proved they don't need reality, they just need hope and this plan gives it for awhile, no? The thing is while true that the plan is not nearly big enough (see Gold and Silver trading in Asia markets), no debt exchange even takes place until the end of January. Therefore, if no banks have any epic fails before then, this may just push out the reality of this "kick the can" by another 3/4 months or longer. Unless current bond holders get nervous and start to sell because it's almost impossible to get hedge exposure now, likely not much happens in EU markets until next year.

What to make of Sarkozy etc. going to China to speak to the President?  Is there something up their sleeves? Like help with bank recaps so look through to France's credit doesn't take it on the chin?

Thu, 10/27/2011 - 08:40 | 1816686 letitgo
letitgo's picture

Spot on!  Merkel 5 - Sarkozy 1 in terms all Europeans can understand.

I'm sure she wanted to kill the CDS market which she sees as supporting risk taking behaviour in banks that ultimately hurts the rich countries that have to bail them out.

She got the haircut she was looking for months ago when Sarkozy's bank buddies got her to back down and she still hasn't agreed to any further German EFSF contributions (for which she now needs Parliamentary approval) or big-scale printing (which would involve breaching EU law).

Thu, 10/27/2011 - 07:29 | 1816500 K_I_T_T_Y
K_I_T_T_Y's picture

[Dow Jones] The EU's banking package offers two surprises, says Royal Bank of Scotland. The first is that there will be potentially no cash dividends and bonuses for banks that fail the 'sovereign stress' test and their debt investors are at risk of restructuring or conversion to equity. The second is that newly issued contingent capital will count as core tier 1 subject to an EBA defined term sheet. Deutsche Bank (DBK.XE) and, to a lesser degree, Societe Generale (GLE.FR) and BNP Paribas (BNP.FR), have the most to lose if the dividend and bonus conditions are implemented, says RBS.

Logical reaction --> complete deleveraging of risks (similar to what happened in 1929) in order to mantain bonuses....

We won't see a recession, much worse....

Thu, 10/27/2011 - 10:01 | 1816994 Iam_Silverman
Iam_Silverman's picture

"The first is that there will be potentially no cash dividends and bonuses for banks that fail the 'sovereign stress' test"

Stress test?  You mean that annual parody of banking regulatory investigation?  The one Dexia passed, not only with flying colors - but also at the top of the class?  Sounds like a fresh round of bankster bonuses were already written in then!

Thu, 10/27/2011 - 10:34 | 1817137 K_I_T_T_Y
K_I_T_T_Y's picture

oops forgot!

First you do a CDA on the results and then you pass the stress test, so easy to steel money from the company!

Wondering why they are talking only about EU-Banks, US-Banks pay the bigger bonuses....

Think will be a close run who deplets the capital first...

Thu, 10/27/2011 - 07:28 | 1816503 jmcadg
jmcadg's picture

Oh my god, the markets love this shit. EURUSD up $1.14, German Dax up 279 points, French CAC (so apt) up 5.24%, Dow over 12k, S&P up over 2%


I'm going to bed and it just gone midday. Wake me up when this BS stops, I guess that'll be a couple of years much needed sleep.

Thu, 10/27/2011 - 07:28 | 1816504 dvsteenk
dvsteenk's picture

are non-european banks holding PIGS debt also bound to accept this 50% "voluntary" haircut?

and smth else: last few days attention was skillfully drawn away from Portugal and Ireland whose bond rates started shooting up again

...ticking time-bombs much closer to catching contagious Greekinosis than Italy, Spain, and Belgium which were kept in the news

Thu, 10/27/2011 - 07:32 | 1816509 Christoph830
Christoph830's picture

You can ban short selling or render CDS worthless but the market always finds a way...this is unsustainable and will only serve to intensify the ultimate collapse. European sovereign debt is now a closed market for private creditors, and the only bidders left are the governments themselves! Yields are never coming back down to sustainable levels. This is it.

Thu, 10/27/2011 - 07:39 | 1816516 slackrabbit
slackrabbit's picture

exactly - this has made the problem worse.

what are they going to ban next - shorting government bonds?

Thu, 10/27/2011 - 08:25 | 1816623 agent default
agent default's picture

Count on it.

Thu, 10/27/2011 - 07:36 | 1816513 slackrabbit
slackrabbit's picture

Expect a sell off in credit default swaps - it seems when it comes to countries they are now worthless - but only when it's the powers that be dictate that they are. So nice to know cds hedging is now based on government whimsy.

likewise expect a possible string of interest rate risk and credit downgrades - if the market cannot hedge against sovereigns expect allot of money to leave the market - gold anyone?

Thu, 10/27/2011 - 07:39 | 1816517 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

Riddle me this:

A: ECB is  buying PIIGS bonds.         

B: An EFSF SPV is constructed to issue  bonds (debt)to  raise monies  to buy  PIIGS bonds (debt)

C: EFSF is capitalised of sovereign guarantees which include PIIGS nations guarantees


Syllogism:: IF(ABC) then alot more (A)


Question: why is the Euro strengthening?



Thu, 10/27/2011 - 07:45 | 1816529 Ghordius
Ghordius's picture

answer: because of gravity

the stuff the EuroZone is setting up is bad, and it's still not as bad as what the US and the UK are doing

of course, you can believe what the MegaBanks are saying, i.e. that EURUSD has to go to 1.3 so that the December figures look better

Thu, 10/27/2011 - 10:04 | 1817010 Iam_Silverman
Iam_Silverman's picture

"Question: why is the Euro strengthening?"

Because this new plan will recapitalize European banks holding Greek debt.  The other banks worldwide are kinda' screwed now!

Thu, 10/27/2011 - 07:40 | 1816518 sabra1
sabra1's picture

i wonder if china hedged against their US treasury holdings?

Thu, 10/27/2011 - 07:58 | 1816563 MFL8240
MFL8240's picture

Sure they do with US dollars! You know, the reserve curreency! lol!!

Thu, 10/27/2011 - 07:40 | 1816519 goldenbuddha454
goldenbuddha454's picture

A new product from banks needs to be invented to hedge against the ISDA declaring insolvency of sovereigns a "non-credit event".  Basically you would have an insurance policy against the CDS not paying given an obvious "credit event"!

Thu, 10/27/2011 - 08:00 | 1816567 MFL8240
MFL8240's picture

That is what  derivative contract is.  Now you understand how fucked up this who sham is?

Thu, 10/27/2011 - 07:42 | 1816522 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

PS I understand equities rallying...hell , money is being printed, but why Euro up and gold static?

Thu, 10/27/2011 - 07:59 | 1816565 MFL8240
MFL8240's picture

Because the whole global economy is a charade of fraud and deceit led by the Wall Street GANGSTERS.

Thu, 10/27/2011 - 08:08 | 1816586 Esso
Esso's picture

That's just how we roll in Hopiumland.

Thu, 10/27/2011 - 07:44 | 1816525 earnulf
earnulf's picture

As Sheldon would say, "In what world is a 50% haircut not a Credit event trigger?"    Hell, frontiersman and indians scalped for less.     As someone pointed out, If it's voluntary, why would ANYONE take it? (Have you seen the barber, that sissorhands fellow).      Anyone holding soverign CDS has chit for brains or as WC Fields would say, "There's one born every minute".

How the hell the stock markets could be up and folks touting this as progress is a spin that would cause most sane people to hurl thier socks, not to mention thier other unmentionables.    This has epic failure written large but the neon lights are unseen by the two blind mice of europe as they hold hands and gaze into the nuclear inferno of fiscal armaggedon.

Lies, lies and damned statistics!

Thu, 10/27/2011 - 07:44 | 1816528 j0nx
j0nx's picture

These things are happening because the people are allowing them to happen. It really is just that simple folks.

Thu, 10/27/2011 - 07:46 | 1816530 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

This is like paying for years on home insurance. Once day the gov't shows up and burns your house to the ground while preventing the insurance company from paying out.

Thu, 10/27/2011 - 07:47 | 1816533 Lady Heather...UNCLE
Lady Heather...UNCLE's picture's all irrelevant. Our thoughts are irrelevant. If you can print a paradigm as powerful as cash, it's all irrelevant. The paradigm must cahnge. PMs

Thu, 10/27/2011 - 07:49 | 1816537 Everybodys All ...
Everybodys All American's picture

The whole CDS market is now a complete joke.

Thu, 10/27/2011 - 07:53 | 1816547 MFL8240
MFL8240's picture

Why now?  Seems to me, its been a joke for years.

Thu, 10/27/2011 - 07:51 | 1816540 MFL8240
MFL8240's picture


Print more money you cannot pay back, fuck with the natural events that would cleanse the system, perpetuate the Ponzi scheme and DOW 12,000.  This country is a group of fucking gangsters and this fraud needs to end before there is no turning back, or, have we already reached that point.  The Wall Street gangsters are entirely out of control and while I agree with the OWS message, I am ashamed that the ACORN trash could not find a more coherent group than the unemployed children they sucked into free money, drugs and sex.  Leave it to camp Osama/Obama to reach a new low on a daily basis. 


Thu, 10/27/2011 - 07:52 | 1816545 Seasmoke
Seasmoke's picture

that point has already been they are seeing how far they can take things

Thu, 10/27/2011 - 07:55 | 1816553 MFL8240
MFL8240's picture

Oh come on, you know, grow the economy (without manufacturing or consumption) and all will be well.  Just listen to the lunatics in charge of the USSA.

Thu, 10/27/2011 - 08:28 | 1816631 tocointhephrase
tocointhephrase's picture

-1 from the Coherent-Sex statement. Revolution is on the heels of the system. Young and Old, 'Rich' and 'Poor' have united over corporate greed and coruption! Occupy the world Bitchez, Occupy Gold and Silver. Fuck a banker where it hurts!


Thu, 10/27/2011 - 07:51 | 1816541 Seasmoke
Seasmoke's picture

there are no more rules or laws.........why do people still follow them

Thu, 10/27/2011 - 08:29 | 1816641 tocointhephrase
tocointhephrase's picture

Anarchy with Socialism for the rich. An interesting concept! 

Thu, 10/27/2011 - 07:51 | 1816542 AngryGerman
AngryGerman's picture

the only way i see that this whole charade is going to work is if we get another round of circle investments: I buy sth from you if you buy sth from him and he buys sth from me (simplified here of course).

Thu, 10/27/2011 - 07:53 | 1816543 whaletail
whaletail's picture

This is stunning. And that's something in today's world. 

Why argue about the merits of PM's at cocktail parties? The argument makes itself now. "Yes, Buffy, but you should really consider the concept of 'counter-party risk' before investing..."

Thu, 10/27/2011 - 07:52 | 1816546 sabra1
sabra1's picture

i bought some cedar bushes the other day. the salesman asked if i wanted frost damage insurance. i replied, you, you mean a cedar hedge?

Thu, 10/27/2011 - 07:55 | 1816554 AngryGerman
AngryGerman's picture

how would that work? if it freezes you get new bushes or what?

Thu, 10/27/2011 - 07:56 | 1816560 whaletail
whaletail's picture

What if only 50% of the bush freezes? Is that a frost event? 

Thu, 10/27/2011 - 08:02 | 1816572 AngryGerman
AngryGerman's picture

Isn't it voluntary freeze anyway, bc you do not live in the tropics?

Thu, 10/27/2011 - 07:57 | 1816561 slackrabbit
slackrabbit's picture

from now on only the government decides  if you get a hedge - are you a party member?


Thu, 10/27/2011 - 08:31 | 1816646 Al Gorerhythm
Al Gorerhythm's picture

If I get issued a hedge, can I trim it?

Thu, 10/27/2011 - 07:58 | 1816556 Quinvarius
Quinvarius's picture

This is a good time to remember, "when rich people lose, they change the rules".  If you want fair capitalism, buy physical gold and wait.  There is no way participation in a paper system this nutty is going to last.

Thu, 10/27/2011 - 08:05 | 1816578 MsCreant
MsCreant's picture

Until there are physical shortages of things, or until the average person UNDERSTANDS what is happening and what it means, they can't see the crime and get pissed. Thus the amorphous nature of "Occupy Wall Street." The paper system can go on without any of us investing, we should call it government INFESTING, they will prop it up with some program or printing or intervention de jure. As insane as this feels, it will go on.

Thu, 10/27/2011 - 08:59 | 1816756 Catch-22
Catch-22's picture

If I may, "...intervention de jure." should be " intervention du jour."  

I still gave you an up arrow... I totally agree.

Thu, 10/27/2011 - 09:37 | 1816902 MsCreant
MsCreant's picture

I think your word choice is cleaner than mine. I am on shaky ground for mine making sense, yours is not. However, take a look at the definition of de jure, from wiki.

In a legal context, de jure is also translated as "concerning law". A practice may exist de facto, where for example the people obey a contract as though there were a law enforcing it, yet there is no such law. A process known as "desuetude" may allow de facto practices to replace obsolete laws. On the other hand, practices may exist de jure and not be obeyed or observed by the people (emphasis mine).

Regarding the CDSs, you see where I am going here? But I may be out of bounds, I don't use this phrase daily.

Thu, 10/27/2011 - 08:01 | 1816570 dcb
dcb's picture

does that mean buying cds is worthless, or the trades meaningless

Thu, 10/27/2011 - 08:01 | 1816571 belogical
belogical's picture

Do you think the bank taking a 50% haircut on my mortgage would be considered a default event

Thu, 10/27/2011 - 08:04 | 1816574 No Mas
No Mas's picture

One must feel for the ZH Sheeple; the Tyler Durdens have told you with a relentless barage of "reports" that the EU is failing and that Greece will burn.  It's all over and the PIIGS will fall.

But, alas they awake to the news that Dear Leader has once again been proven wrong as the Tylers spew forth a veritable flood of excuses and whinings.  No matter, the EU lives to stand another day, "farce" and all.  The euro runs to highs against the greenback (still want to fight this fed?) and the market looks to rocket to 14K or better by year end.

The Sheeple can find solace in knowing that some day, something really bad will happen; it always does you know.  But for the immediate future, the EU moves along, China hasn't crashed and the OWS movement begins to eat itself alive from within all while attempting to martyr some fool via suicide by cop.

Well, the rest of us are out and about, enjoying the good news.  Smile ZH Sheeple; you'll live longer.

Thu, 10/27/2011 - 08:08 | 1816585 MsCreant
MsCreant's picture

I agree that it goes on, the game is rigged for now. But why be such an arrogant self important prick about it?

Thu, 10/27/2011 - 08:17 | 1816607 Esso
Esso's picture

Gee, you're makin' friends fast there, Mr. Mas.

Thu, 10/27/2011 - 08:23 | 1816621 Kina
Kina's picture

You sound just a triffle pathetic? Got a few unresolved personal issues there?

Thu, 10/27/2011 - 08:37 | 1816674 Esso
Esso's picture

He's probably just mad because gold & silver isn't going to zero like the CNBSers promised.

Thu, 10/27/2011 - 08:34 | 1816660 tocointhephrase
tocointhephrase's picture

You will do well in Government or maybe you are the Government, either way take a blanket coz Hell is a very cold place!

Thu, 10/27/2011 - 08:35 | 1816664 tocointhephrase
tocointhephrase's picture

Occupy Gold and Silver Bitchez!

Thu, 10/27/2011 - 08:37 | 1816675 slackrabbit
slackrabbit's picture


Thu, 10/27/2011 - 08:13 | 1816597 terryfuckwit
terryfuckwit's picture

so mr and mrs clever hedgie cds swap.. i can play this casino etc etc ... what have you learned today... i am sure plenty on here can tell you where the bullion dealers are....LOL

Thu, 10/27/2011 - 08:21 | 1816616 Kina
Kina's picture

These bankers are a sinister evil on society. They are a plague of evil leeches that will suck everything dry. They wont stop their vile work until they own everything and everybody on the planet.


Pitty their isn't a virus that just affects banksters.


Thu, 10/27/2011 - 08:28 | 1816635 Esso
Esso's picture

Farce is a good way of describing this thing. It's like the cartoon snowball rolling downhill getting bigger and bigger as it goes, except in this case the ball is rolling uphill from the bottom and instead of snow, it's money. Soon the giant moneyball will be perched on the top 0.1% of the hill, and everything below stripped bare.

Thu, 10/27/2011 - 08:21 | 1816618 kiklion
kiklion's picture

So a question, since it is not a 'Credit Event' due to it being voluntary, can I choose not to accept the haircut and redeem my bonds at par upon maturation?  

Thu, 10/27/2011 - 08:28 | 1816633 chrisd
chrisd's picture

What can those people with CDS on greek do? Will they sue the ISDA over this?


Thu, 10/27/2011 - 08:31 | 1816638 chindit13
chindit13's picture

I suspect part of this “non-event” is to send a message to people (e.g., Kyle Bass) who were long CDSs without having any position in the underlying bond.  The message is you cannot buy insurance on your neighbor’s house burning down.

The other peculiarity---as if there are not enough---is that if I am heavily long some debt, I am now encouraged to write CDSs against my own position so that I can collect the premium.  Then, when I am forced to take a haircut, I can call it “voluntary” so as not to invoke a credit event that would force me to pay on the CDSs I‘ve written.  In this way, I limit my losses, especially if I wait until “default” looks certain (thereby maximizing the premium I receive).

Another bizarre way a profligate government could abuse CDSs is to go out of its way to appear as if it is on the brink of default, then sell CDSs---through a collaborator---on itself.  With the premiums received, the government might then make payment on its debt, thereby eliminating the possibility of default.

When the going gets weird, the weird turn pro.

Thu, 10/27/2011 - 08:42 | 1816693 Peter Pan
Peter Pan's picture

Mate, this could make a bloody good movie. Just love it.

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