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ISDA Unanimous - No Payout On Greek CDS

Tyler Durden's picture


As expected by virtually everyone:


Keep in mind, as criminal as this appears, and as damaging to the CDS market, the real trigger will be what ISDA does determines following the end of the PSI process. If there is no credit event then either, especially when the CACs are triggered as expected - an event which will certifiably be a trigger event under Section 4.7, then ISDA is truly hell bent on blowing up the CDS market as a hedging vehicle in its entirety.

As a reminder, here is the EMEA determinations committee:


Voting Dealers
Bank of America / Merrill Lynch
BNP Paribas
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
Societe Generale

Consultative Dealers
The Royal Bank of Scotland

Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)


As a quick follow up, the bolded hedge fund in the ISDA determination committee is the party that many expect to be the primary hold out in the PSI. There is much more to this story than meets the eye, especially if Elliott voted with the rest of the banks for the unanimous decision.

Full PR:

EMEA Determinations Committee Statement March 1, 2012

In light of today’s EMEA Determinations Committee (EMEA DC) unanimous decisions in respect of the two potential Credit Event questions relating to the Hellenic Republic (DC Issue 2012022401 and DC issue 2012022901), the EMEA DC has agreed to publish the following statement:

The first submitted question (DC Issue 2012022401) asked whether the holders of Greek law bonds had been subordinated to the ECB and certain NCBs whose bonds were acquired by the Hellenic Republic prior to the implementation of new Greek legislation such that such subordination constitutes a Restructuring Credit Event. (The full text of the question is available here

The EMEA DC unanimously determined that the specific fact pattern referred to in the first submitted question does not satisfy either limb of the definition of Subordination as set out in the ISDA 2003 Credit Derivatives Definitions (the 2003 Definitions) and therefore a Restructuring Credit Event has not occurred under Section 4.7(a) of the 2003 Definitions.

The second submitted question (DC Issue 2012022901) asked whether there had been any agreement between the Hellenic Republic and the holders of private Greek debt which constitutes a Restructuring Credit Event. (The full text of the question is available here

The EMEA DC determined that it had not received any evidence of an agreement which meets the requirements of Section 4.7(a) of the 2003 Definitions and therefore based on the facts available to it, the EMEA DC unanimously determined that a Restructuring Credit Event has not occurred under Section 4.7(a) of the 2003 Definitions.

The EMEA DC noted, however, that the situation in the Hellenic Republic is still evolving and today’s EMEA DC decisions do not affect the right or ability of market participants to submit further questions to the EMEA DC relating to the Hellenic Republic nor is it an expression of the EMEA DC’s view as to whether a Credit Event could occur at a later date, in each case, as further facts come to light.


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Thu, 03/01/2012 - 08:47 | 2211859 The Swedish Chef
The Swedish Chef's picture

What a shocker... Who woulda thunk it?

Thu, 03/01/2012 - 08:52 | 2211885 maxmad
maxmad's picture

This will actually backfire on them!  Liquidity trap!!!!

Thu, 03/01/2012 - 08:55 | 2211899 Hober Mallow
Hober Mallow's picture

I am Tarzan


Thu, 03/01/2012 - 09:15 | 2211942 GetZeeGold
GetZeeGold's picture



It's wasn't my fault......please don't default me!



In other news.....


Free Jon Corzine!!!!


Oh wait.......he is.



Thu, 03/01/2012 - 08:56 | 2211902 bdc63
bdc63's picture

My mother used to always tell me that 'life isn't fair' ... is this what she was talking about?

Thu, 03/01/2012 - 09:09 | 2211935 Comay Mierda
Comay Mierda's picture

Any buyer of cds should have seen this coming. Did they actually think the criminal banking mafia would honor these contracts? Sovereign bond rates have been artificially low for a long time because enough fools in the market thought cds were genuine risk reduction.

on a side, a lot of lawyers are going to get rich battling this ruling out in court for years to come

Thu, 03/01/2012 - 09:16 | 2211995 GetZeeGold
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Wait.....are you telling me the criminal banking mafia......are crooks?


Thu, 03/01/2012 - 10:54 | 2212434 Omen IV
Omen IV's picture

the more i look at so many aspects of business today - the real 1% are actually less than 1/8 of 1% - no matter how rich you are  - you need to be able to pony up minimum of $1 milllion to - politicians, judges and regulators and minimum of $2.5 million to the lawyers and lobbyists to cover you when there is a problem - otherwise you are part of the rabble -  being rich is never enough only mega rich and very connected - chins the bar! 

Thu, 03/01/2012 - 11:01 | 2212469 Kayman
Kayman's picture

Thank you for your premium... Claim denied...

p.s.  go fuck yourself....

the Syndicate.

Thu, 03/01/2012 - 09:26 | 2212044 GMadScientist
GMadScientist's picture

"Liquidity trap!!!!"

C'mon...if that were true, we'd see corps hoarding cash and...oh...shit.

Thu, 03/01/2012 - 09:32 | 2212075 Jefferson
Jefferson's picture

This is bullish because now the price of the CDS insurance will go down because there is no risk the counterparty will be required to pay up. Then the MSM will spin this as showing less credit risk on sovereign debt.

Thu, 03/01/2012 - 09:52 | 2212169 kridkrid
kridkrid's picture

Win Win.  What could go wrong?

Thu, 03/01/2012 - 10:56 | 2212441 Sizzurp
Sizzurp's picture

Well if you can't buy insurance on the crappy bonds you buy, I guess there is no reason to buy the crappy bonds anymore.  Also, all these banks that have been writing the CDS's and getting paid nice premiums, are going to see that cash flow go away.  What a bunch of crooks.

Thu, 03/01/2012 - 11:15 | 2212537 catacl1sm
catacl1sm's picture

Absolutely correct. Considering that all they care about is money, they must have calculated that the lost revenue stream (at least over a period of time) is less than the cost of paying out on the CDS's, especially if the CDS's will bankrupt them.

Thu, 03/01/2012 - 08:57 | 2211909 cossack55
cossack55's picture


Thu, 03/01/2012 - 08:47 | 2211860 Robslob
Robslob's picture

Bankers fucking Bankers?


Starting to get confusing.

Thu, 03/01/2012 - 08:53 | 2211890 johnQpublic
johnQpublic's picture

pardon my ignorance, BUT....

isnt it a good thing if the whole CDS thing is basically bullshit?

quarter quadrillion notional dollars and all

remove the CDS and you remove the ability to blow up countrys and financial institutions

Thu, 03/01/2012 - 08:56 | 2211905 Boilermaker
Boilermaker's picture

Well, if selling fraudulent financial instruments and pocketing the profits is good....then yea.

What if you crash your car and call up State Farm and they say....ehhhh....we don't consider your crash and actual crash.  Sorry.

Thu, 03/01/2012 - 09:07 | 2211952 GetZeeGold
GetZeeGold's picture



Hardly a scratch........lil primer will fix that right up.



Thu, 03/01/2012 - 11:17 | 2212540 catacl1sm
catacl1sm's picture

"I've still got my legs!"

Thu, 03/01/2012 - 09:17 | 2212002 Vince Clortho
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Excellent.  +1


Now don't be giving them any ideas.

Thu, 03/01/2012 - 09:21 | 2212005 Manthong
Manthong's picture

Then you don't exchange a portion of your stored weatlh for State Farm's fraudulant policy.

A dollar in any bank account is an exchange of wealth for their promise to pay you to use it and their promise to give it give it back to you.

They don't pay you to use it anymore, and the question is will they give it back.

I look to the GM and Greek bondholders for some help with that answer.

That used to be a nominal concept, what with inflation and all but now it is a real threat of the value af any promise linked to the financial system.

Thu, 03/01/2012 - 09:27 | 2212047 GMadScientist
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Ask most of New Orleans.

Thu, 03/01/2012 - 10:19 | 2212285 Raging Debate
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Very good analogy Boilermaker. As my Grandmother use to say regarding the Great Depression era was a "contract is only as good as the paper it is written on".

That for me was pretty easy to understand at an early age.
Her other one was "Never trust a banker they love foreclosures". Now that advice I didn't fully understand until 2009.

Massive, broken monetary promises between sovereigns become currency wars, trade war and real war. It's 1937 all over again. Good luck and God bless you all. We're going to need it.

Thu, 03/01/2012 - 18:18 | 2214809 RockyRacoon
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MF Global was a trial run to see how contracts could be negated and wealth stolen.   This is another trial run to see how easy it will be to steal even more institutionalized fortunes.   Yeehaw!   Ain't it sweet?   Some very rich folk are getting their heads ripped off.   Lovin' the show.

For all of those here who would like to bash the underwater homeowners walking away from their "contractual obligations" of the mortgage...  this shows who started it and how they will eventually fall from grace.

Thu, 03/01/2012 - 09:00 | 2211920 Schmuck Raker
Schmuck Raker's picture

Remove CDS and you remove hedging on sovereign bond, and demand.

Thu, 03/01/2012 - 09:02 | 2211932 maxmad
maxmad's picture

This will create a collapse!  hmmmmm... maybe thats what they want...

Thu, 03/01/2012 - 09:30 | 2212064 espirit
espirit's picture

Greece only has the sausage half-way in, when they decide to go "all in" and refuse to pay - let the party begin.

Thu, 03/01/2012 - 09:56 | 2212185 kridkrid
kridkrid's picture

Collapse is enevitable.  This is russian roulette and every chamber is loaded.  The only questions that remains is timing.

Thu, 03/01/2012 - 12:50 | 2213009 jayman21
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June of this year....Martin Armstrong has been talking about this month the last 3 or 4 months.  He also is saying the capital that is leftover in Europe with flow to the US equity market...and then it will begin to flow out in 2015 or somewhere around there.

Interesting times we live in.

Thu, 03/01/2012 - 09:04 | 2211938 surf0766
surf0766's picture

What impact on rates would it have? There has been much discussion on here about the potential for this to push rates beyond the reach of what sovereigns can pay. In the end if this is true, they will default anyway. Correct?

Thu, 03/01/2012 - 09:14 | 2211982 Schmuck Raker
Schmuck Raker's picture

Yes, though I think it is more accurate to say "...they will default sooner."

Thu, 03/01/2012 - 09:22 | 2212016 Ghordius
Ghordius's picture

or they will be fully monetized sooner

Thu, 03/01/2012 - 09:32 | 2212073 Schmuck Raker
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Wouldn't be any fun if we knew which, would it? :)

Thu, 03/01/2012 - 09:31 | 2212072 GMadScientist
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Rates cease being nailed to the floor (but when paying with synthetic confetti, does it really matter?).

That logic holds true for any rate above 0, for the "sovereigns" (who are anything but).

Thu, 03/01/2012 - 09:15 | 2211992 Ghordius
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though this begs the question about how there was any demand before CDSs were "invented".

Thu, 03/01/2012 - 09:30 | 2212058 Schmuck Raker
Schmuck Raker's picture

I didn't say all demand.

Besides, NOW is what matters. THEN, things looked rosier.


But still, your argument is valid. Before CDS there probably was less demand for debt => higher rates => less available credit => wiser investment => less leverage => greater stability of the whole financial system. [good times, good times...sigh]

Thu, 03/01/2012 - 09:38 | 2212105 Ghordius
Ghordius's picture

the really good times? look up how Philip II of Spain and Elizabeth I of England payed their creditors!

You know who really stabilized the sovereign bond market and made it the way it was until CDSs? - drum roll - the Rothschilds.

And their customers knew they were real market makers that would always hold a sizable portion of them - so there were real persons with skin in the game.

Thu, 03/01/2012 - 10:01 | 2212207 GeneMarchbanks
GeneMarchbanks's picture

If by 'stabilized' you mean subverted, then yea.

Thu, 03/01/2012 - 11:04 | 2212486 Die Weiße Rose
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Global Bond market size

As of 2009, the size of the worldwide bond market (total debt outstanding) is an estimated $82.2 trillion, of which the size of the outstanding U.S. bond market debt was $31.2 trillion according to Bank for International Settlements (BIS), or alternatively $35.2 trillion as of Q2 2011 according to Securities Industry and Financial Markets Association (SIFMA).

Nearly all of the $822 billion average daily trading volume in the U.S. bond market takes place between broker-dealers and large institutions in a decentralized, over-the-counter (OTC) market. However, a small number of bonds, primarily corporate, are listed on exchanges.

Amounts outstanding on the global bond market increased by 5% in 2010 to a record $95 trillion. Domestic bonds accounted for 70% of the total and international bonds for the remainder. The US was the largest market with 39% of the total followed by Japan (20%). As a proportion of global GDP, the bond market increased to 130% in 2010 from 119% in 2008 and 80% a decade earlier.

The considerable growth means that at the end of 2010 it was much larger than the global equity market which had a market capitalisation of around $55 trillion. Growth of the market since the start of the economic slowdown was largely a result of an increase in issuance by governments, with government bonds accounting for 43% of the value outstanding at the end of 2010, up from 39% a year earlier.

The outstanding value of international bonds increased by 3% in 2010 to $28 trillion. The $1.5 trillion issued during the year was down 35% on the 2009 total. The first quarter of 2011 was off to a strong start with issuance of nearly $500bn. The US was the leading centre in terms of value outstanding with 24% of the total followed by the UK 13%.

Because of the specificity of individual bond issues, and the lack of liquidity in many smaller issues, the majority of outstanding bonds are held by institutions like pension funds, banks and mutual funds. In the United States, approximately 10% of the market is currently held by private individuals.

Bond markets determine the price in terms of yield that a borrower must pay in order to receive funding. In one notable instance, when President Clinton attempted to increase the US budget deficit in the 1990s, it led to such a sell-off (decreasing prices; increasing yields) that he was forced to abandon the strategy and instead balance the budget.

I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.

Thu, 03/01/2012 - 09:53 | 2212174 GMadScientist
GMadScientist's picture

I've heard tell of a time when holding bonds was rewarded (for liquidity or time preference as you see fit) with yields.

Goddamn fairyfolk.


Thu, 03/01/2012 - 10:02 | 2212211 kridkrid
kridkrid's picture

There was demand because we were in the early stages of creating the monetary ponzi scheme.  As we embarked on the 40 year bubble that is pure fiat / credit money where virtually all money is loaned into existence... sovereign debt didn't look so bad.  Who cares if the sysem is built to collapse if you can get our before it does.  The further along the path of unsustainability we went, the more sweatners were needed to play in the ponzi sandbox.  At this point, the world is completely disconnected from reality.

Thu, 03/01/2012 - 10:08 | 2212238 chindit13
chindit13's picture

Don't confuse CDSs with derivatives in general.  The total CDS market, even gross notional, is not an especially large part of the overall derivatives market. It is probably less than 2% of the total derivative market.  Think of CDSs as put options on bonds.

Regarding derivatives as a whole, I agree with your comment.  While some derivatives have legitimate uses (e.g., some rate swaps, FX swaps), most other derivatives just help create an illusion that risk can be minimized.  In reality, risk just ends up in the lap of someone who cannot afford it and who probably misprices it...AIG being the most notable example.  Furthermore, Lehman showed everyone that the potential damage is not limited to net notional.

Finally, the latest figures I can find on Greece CDSs are slightly less than $3 billion net notional and around $160 billion gross notional.  Not all are owned as a hedge of an underlying sovereign bond position.  There is no requirement that they play that role.

Thu, 03/01/2012 - 21:44 | 2215398 Schmuck Raker
Schmuck Raker's picture

"The total CDS market, even gross notional, is not an especially large part of the overall derivatives market. It is probably less than 2%..."

Derivatives market estimated to equal $700 Trillion, X 2% =

$15 Trillion CDS Market. Hardly chicken feed.

Thu, 03/01/2012 - 11:26 | 2212594 Jake88
Jake88's picture

If this puts an end to these weapons of financial mass destruction then a good thing will have come out of it.

Thu, 03/01/2012 - 08:47 | 2211861 knight99
knight99's picture

Thats fked!! Are they say no trigger even if CAC is excuted?

Thu, 03/01/2012 - 08:48 | 2211864 Ghordius
Ghordius's picture

Freedom! Freedom to default, yeah! BAN CDSs

Thu, 03/01/2012 - 08:53 | 2211893 GeneMarchbanks
GeneMarchbanks's picture

While I sympathize with your call to restore sanity you'll just have to accept that a 'market' for something exists only as long as there are buyers.

Mundus vult decipi

Thu, 03/01/2012 - 09:06 | 2211945 Ghordius
Ghordius's picture

look, Gene, I know you are sometimes horrified by my (continental european) views on markets and state - but there is a limit to everything.

no, I don't see your argument - the typical buyers are huge corporations and hedgies, to make the TBTF argument stronger

five MegaCorps dominating the whole world? come on, I constantly read here all those rants against central banks being the central planners, but no, as soon as we get to the derivatives it's fine, it's the market. this huge derivatives betting casino is forcing the world to go the way the five want, and give them all liberties due to the ReallyFuckingTooBigTooFail.

it was a scam from the start on, now they are backing from the bluff. there are serious problems enough to cater to the whims of bankster's bets.

and since there is always someone asking for solutions: cut the megabanks to less harmful pieces. even the US of A has the laws and precedents for doing it, last seen with Bell and the Baby Bells.

Thu, 03/01/2012 - 09:19 | 2212009 GeneMarchbanks
GeneMarchbanks's picture

Once the corporate robot is installed at the top, corporate personhood will be complete. They'll burn/erase all history books and for each new generation there will be a new layer of Corporate History, you know, like The Holocaust written by IBM.

This is our future.

Thu, 03/01/2012 - 09:27 | 2212049 Ghordius
Ghordius's picture

nah, the Magi at the court of the King of Babylon predicted something similar

those corporations behave like those huge pine trees, they grow and grow and with their fallout destroy the underbrush - until they burn

MAD still applies, as you also are fond to remind - all the rest is human failings, as usual

Thu, 03/01/2012 - 10:46 | 2212395 Raging Debate
Raging Debate's picture

Nicely stated Ghordius. The 40 year cycle of the massive mega everthing is collapsing. Pyramids always do when the top is so heavy it crashes through the base of itself right into the people. Physics shows a split into two visible parts with a third being money or group of rulers. Perhaps for America a new government but don't be surprised if half of it is the same people that drove this government into the ground.

Another way to say it is decentralization. History tells me it gets real messy but unless we have all out nuclear war the time period of chaos and violent madness is but a few short years. Wise to have some hedges but I myself am not concerned about a Mad Max world where I see American Gulag sponsored by IBM.

The gulag is already built in the American system and funded by private investment groups most of us never heard of. It may get a lot more guest workers soon in event of major military confrontation and protestors of such but again, I see that as short or intermediate term.

Thu, 03/01/2012 - 09:02 | 2211926 i-dog
i-dog's picture

I think they've just banned themselves!! No need for yet another quango ... who'd buy a CDS now?

Thu, 03/01/2012 - 09:10 | 2211965 GetZeeGold
GetZeeGold's picture



Today we need someone to do something incredibly fuking're the one to do it aren't you lumpy - Robin Williams.



Thu, 03/01/2012 - 08:47 | 2211866 Dcheeth2
Dcheeth2's picture


Thu, 03/01/2012 - 08:48 | 2211868 williambanzai7
williambanzai7's picture


Thu, 03/01/2012 - 08:50 | 2211869 Sketch
Sketch's picture

I'm gonna call up my barclay's CC and tell them I'll pay 30% of the bill, and any attempt to notify the credit agencies will result in a slander & libel suit...


/that should fix it.

//trolling is a art

Thu, 03/01/2012 - 08:49 | 2211870 Boilermaker
Boilermaker's picture

If you can't locate the sucker in the card game....welll....

Thu, 03/01/2012 - 08:49 | 2211872 nabi
nabi's picture

Who in their right mind would buy a sovereign CDS now that ISDA has shown their true colors?

Thu, 03/01/2012 - 09:23 | 2212026 chinaguy
chinaguy's picture

Yes this is just more can kicking, the banks don't want to get  blown up (via CDS) but they also want the CDSs for their cheap cover, cheap insurance & all of their SIVs...

Thu, 03/01/2012 - 09:42 | 2212120 DB Cooper
DB Cooper's picture

Or a sovereign bond!

Thu, 03/01/2012 - 10:04 | 2212222 GeneMarchbanks
GeneMarchbanks's picture

All of those who bought before in actual belief that they are hedged.

Shame is powerful, consult your local psychologist for more.

Thu, 03/01/2012 - 14:27 | 2213441 Island_Dweller
Island_Dweller's picture

Who in their right mind would buy a sovereign CDS now that ISDA has shown their true colors?


Central Banks......


Thu, 03/01/2012 - 08:50 | 2211874 youngman
youngman's picture

I knew it....just another nail in the "free Market" coffin....well now we will see if there are any bond vigilantes left to take on the banking cartel....the Casino is now do they try to shut it down.....I hope they do as I think it is just a Casino....all in all it would be better for the market....

Thu, 03/01/2012 - 08:51 | 2211875 TahoeBilly2012
TahoeBilly2012's picture

Hellenic Republic, what a load of crap. Who are these people in the world anyways, these boardroom types, can't change a fucking light bulb I bet! I sorta picture Ted Knight in Caddy Shack or something.

Thu, 03/01/2012 - 09:47 | 2212148 Dr. No
Dr. No's picture

"Without lamps, there'd be no light. "

Thu, 03/01/2012 - 08:50 | 2211879 DB Cooper
DB Cooper's picture

All your CDS are belong to us.

Thu, 03/01/2012 - 09:03 | 2211882 Goldtoothchimp09
Goldtoothchimp09's picture

Nobody expects to actually get paid out on CDS - they are used for accounting gimmickry...but a little CDS insurance and you get to pretend billions of risk on your balance sheet is 'hedged'

The magic accounting fairies say "poof"  risk is gone -- leverage up!!  Maybe this could ignite some counterparty risk though...For fuck sake -- it's bascially 4-6 financial institutions all hedging against eachother.  One goes, they all go.  See AIG.

Thu, 03/01/2012 - 10:01 | 2212208 GMadScientist
GMadScientist's picture

I pity the house of cards...especially if they can't continue to "account" (ha!) thusly since the CDS aren't money good.

Those balance sheets are gonna need some Viagra.

Thu, 03/01/2012 - 11:24 | 2212573 catacl1sm
catacl1sm's picture

I was just sitting here wondering how this would affect the "net" positions of many banks and primary dealers. hmmmm.....

Thu, 03/01/2012 - 08:52 | 2211889 Everybodys All ...
Everybodys All American's picture

Unintended consequences are going to be rather LARGE selling of EU bonds. If Greece is not in default then no one is hedged any longer and that is the ongoing problem for all holders of this debt.

Thu, 03/01/2012 - 08:54 | 2211898 EmileLargo
EmileLargo's picture

ISDA isn't a court. Whether it is a credit event or not is a legal question and a court may take a different view.

Thu, 03/01/2012 - 08:57 | 2211907 valley chick
valley chick's picture

and let me guess...that is rigged too.

Thu, 03/01/2012 - 10:02 | 2212209 GMadScientist
GMadScientist's picture

Less centrally, YMMV.

Thu, 03/01/2012 - 08:58 | 2211913 Boilermaker
Boilermaker's picture

Wrong, they are the governing body and you AGREED to let them be the sole deciders when the CDS was purchased.

In short, you're fucked.

Thu, 03/01/2012 - 09:01 | 2211928 EmileLargo
EmileLargo's picture

Says who? Under which contract? Every contract is heavily negotiated. Bespoke contracts are the norm among the larger players. Secondly, even if it had the power to arbiter that under a CDS, the power wouldneed to be execised in a commercially reasonable manner.

Thu, 03/01/2012 - 09:25 | 2212038 Boilermaker
Boilermaker's picture

You are clinically insane if you don't think they've got their asses covered....completely.

Thu, 03/01/2012 - 09:57 | 2212188 EmileLargo
EmileLargo's picture

That's a nice argument - everyone who disagrees with you is "clinically insane". Thanks for your time.

Thu, 03/01/2012 - 10:40 | 2212369 Boilermaker
Boilermaker's picture

I don't care if you cling, helplessly, onto your dream of fairness and justice-for-all.

That's fine with me.

Thu, 03/01/2012 - 09:05 | 2211941 Catullus
Catullus's picture

who cares?  They're worthless until you win in some court years from now.

Thu, 03/01/2012 - 09:49 | 2212156 Dr. No
Dr. No's picture

"until you WIN in some court years from now"  lulz.  The courts are in on the game.

Thu, 03/01/2012 - 10:40 | 2212370 Cole Younger
Cole Younger's picture

CDS are unregulated by governments so a court would have to look at the definition of a default defined by the ISDA. If the ISDA applied the wrong determination based on there own guidelines / contract, a court may act. A court ruling is limited to the contracts definitions and not necessarily what is generally percieved as a default.

Thu, 03/01/2012 - 11:29 | 2212584 Kayman
Kayman's picture

A legal question ?  That is part of the rigged game.  If you need to go to court to determine if your counterparty is honest or not, then you have already lost.

Good money chasing bad.  Bankers and lawyers love it.

Number one question when sueing a bank- How long can you hold your head in a bucket of water ?

Thu, 03/01/2012 - 08:57 | 2211908 Catullus
Catullus's picture

There is no hedge for bonds.  You either love them or like them, but you wear that risk. 

Up next: the interest rate swaps when someone who actually knows accounting figures out the CDS are worthless.

Thu, 03/01/2012 - 09:08 | 2211958 Catullus
Catullus's picture

How is this any different than a major bank going bankrupt? What's the difference between Lehman going tits up and defaulting as a counterparty and someone declaring that your counterparty doesn't have to pay you?

Thu, 03/01/2012 - 09:09 | 2211961 EscapeKey
EscapeKey's picture

AIG doesn't sit on the board.

Thu, 03/01/2012 - 09:51 | 2212163 Dr. No
Dr. No's picture

AIG is a middle man.  They were bailed out by the FED when they couldnt cover the payment.  They are a means of laundering money.

Thu, 03/01/2012 - 09:08 | 2211959 EscapeKey
EscapeKey's picture

Oh, but there is. But only if it benefits a big bank.

Thu, 03/01/2012 - 09:15 | 2211996 Catullus
Catullus's picture

Monetize Everything.

Thu, 03/01/2012 - 08:58 | 2211914 ak_khanna
ak_khanna's picture

Whats the use of paying CDS premium when the CDS defaults will always be declared voluntary with a gun held to the head of the private bond holder.

The rule makers and enforcers are in bed with the too big to fail banksters selling the CDS so under no conditions the claims will be paid out. They have managed to make a system wherein they are there only to create volatilty in the markets and collect premium which have to be distributed as bonuses to the top staff with some portions thrown to the politicians as political contributions. All Legal.

Thu, 03/01/2012 - 21:23 | 2215353 supafuckinmingster
supafuckinmingster's picture

ak_khanna: "The rule makers and enforcers are in bed with the too big to fail banksters selling the CDS so under no conditions the claims will be paid out"


I would say that the rule makers and enforcers ARE the too big to fail banksters. That's the problem.

Thu, 03/01/2012 - 08:58 | 2211915 fonzannoon
fonzannoon's picture

Does Kyle Bass have any comments on this stuff? Isn't he famous for buying these cds?

Thu, 03/01/2012 - 08:59 | 2211916 Hooter Shaker
Hooter Shaker's picture

I guess if you get hungry enough, you'll eat your own foot...

Thu, 03/01/2012 - 08:59 | 2211918 DutchDude
DutchDude's picture

What does this mean for the shitload PIGGS paper the ECB holds?

Thu, 03/01/2012 - 09:00 | 2211921 williambanzai7
williambanzai7's picture


Thu, 03/01/2012 - 09:00 | 2211922 lizzy36
lizzy36's picture


ISDA basically said "not today" but situation is fluid.

Although another example of why nobody trusts market. Fifteen guys ALL CONFLICTED sit in a room and make a decision and provide ZERO reasons for decision. "We DETERMINE" but provide no reasons.

Thu, 03/01/2012 - 10:07 | 2212236 GMadScientist
GMadScientist's picture

Would it make you feel better if you knew the process involved Greece rolling a D20 to disbelieve?


Thu, 03/01/2012 - 09:00 | 2211924 PaperBear
PaperBear's picture

Now what do people hedging with a CDS do ?

Damn well sell the CDS and damn well sell the instrument the CDS was hedging, that's what they do.

Thu, 03/01/2012 - 09:25 | 2212037 chinaguy
chinaguy's picture

Nope, not yet...this is an example of the guys in charge playing both far it's all good.......

Thu, 03/01/2012 - 09:00 | 2211925 Bastiat009
Bastiat009's picture

Does that mean you don't have to pay back your loans and banks won't call it a default? Does that work for mortages, car loans ...?? Because that could be great. Free money for all and nobody loses. That sounds good to me. Where do I apply?

Thu, 03/01/2012 - 09:01 | 2211929 Cole Younger
Cole Younger's picture

Technically, no default occurs until March 20.

Thu, 03/01/2012 - 09:20 | 2212013 Schmuck Raker
Schmuck Raker's picture

Or later?

Seven day grace period?

Thu, 03/01/2012 - 09:02 | 2211931 The Swedish Chef
The Swedish Chef's picture

This must be ultra-bullish for financials.

Thu, 03/01/2012 - 09:04 | 2211937 tok1
tok1's picture

  strange, so 70% net write down does not constitute a restructuring ,,,

then what would

The second submitted question (DC Issue 2012022901) asked whether there had been any agreement between the Hellenic Republic and the holders of private Greek debt which constitutes a Restructuring Credit Event.


and 10.7% record EU unemployment is posative for equities..

so there is an obsession with doing anything to maintain excessive liquidity in the bond market even if the impact is higher commodity prices causing lower growth.. Instead of obsessing about meeting demand for bonds.. why dont they.. reduce the supply.. This is Obama;s big mistake..  If he had reduced bond issuance (ie spending) he could have impacted rates in a postive way. instead of increasing the supply and focing Fed to meet the demand....Which with oil rising is clearly going to be unsustainable.. Isn't that what Clinton did balance the budget reduce supply and get the curve to flatten.. 

Thu, 03/01/2012 - 09:07 | 2211946 youngman
youngman's picture

I wonder what a Moody's or an S&P is doing now??????   All those banks ...Hedge Funds...Governments?????   that have hedged with CDS´s are now not hedged...because a CDS will never pay off.....hmmmmmm....

This will......should affect the markets very big in the next few weeks I think.....this is a multi trillion dollar market......and NOW it ISN¨T...????

Thu, 03/01/2012 - 09:19 | 2212011 Lord Welligton
Lord Welligton's picture

Rather the point.

When is a hedge not a hedge?

When it's a bush?

Also what will the Auditors do. Have they relied on CDS in their assessment of banks and insurance cos?

(Well we know what they'll do but you get the point).



Thu, 03/01/2012 - 09:06 | 2211948 HD
HD's picture

Insurance is an great. You're 100% covered right until something actually happens...

Thu, 03/01/2012 - 10:11 | 2212251 GMadScientist
GMadScientist's picture

If it's so great, why do they need to keep mandatinga it?


a) Yes, it does often feel like an involuntary date with one or more male assailants.

Thu, 03/01/2012 - 09:06 | 2211950 edmondantes
edmondantes's picture

CDS clearly worthless and rule of law non-existent


Thu, 03/01/2012 - 09:08 | 2211955 Dr. Engali
Dr. Engali's picture

So what does this do to the revenue stream of whoever writes the swaps? Who is going to get punished? Besides sovereign debt of course.

Thu, 03/01/2012 - 09:09 | 2211960 solgundy
solgundy's picture

it's just the 1%  hosing the 1%......who cares

Thu, 03/01/2012 - 09:18 | 2212006 eddiebe
eddiebe's picture

You should care, because the 1% never take the hosing, they pass it on to you.

Thu, 03/01/2012 - 09:19 | 2212010 GetZeeGold
GetZeeGold's picture



Is it just me.........or is this 99%/1% shit starting to get really old?



Thu, 03/01/2012 - 09:28 | 2212052 Goldtoothchimp09
Goldtoothchimp09's picture

the Occupy douchers claim to represent the 99% -- so long as you're not republican, independent, libertarian or have a working brain -- they are intimated by those types.

Thu, 03/01/2012 - 09:10 | 2211963 johnnymustardseed
johnnymustardseed's picture

The banksters could learn a little bit about stealing from the Trailer Park Boys

Thu, 03/01/2012 - 09:10 | 2211964 Lord Welligton
Lord Welligton's picture



Though still speechless.

Thu, 03/01/2012 - 09:13 | 2211971 TigerTrail
TigerTrail's picture

"Global FLASH CRASH Coming anytime NOW?" - HELL YEA !!!!!!

Thu, 03/01/2012 - 09:15 | 2211985 TigerTrail
TigerTrail's picture


Thu, 03/01/2012 - 09:15 | 2211988 eddiebe
eddiebe's picture

There is no way the banksters will turn loose the derivatives tsunami. This default will be called anything but.

I have a good idea that the sell off in gold yesterday had something to do not only with the bernanks testimony yesterday, but even more so the ISDA statement today. Ben will more than likely continue to buy bonds and notes and  trash the $, and keep gold in check. Amazing the power these fuckers wield. Our bad to let them have it.

Thu, 03/01/2012 - 09:23 | 2212024 Dr. Engali
Dr. Engali's picture

"There is no way the banksters will turn loose the derivatives tsunami. "

I think they just did. Who is going to buy this crap debt now? The Piigs are going to be forced to pay up in higher rates for anybody to buy their debt. This will be contagious.

Thu, 03/01/2012 - 09:40 | 2212111 eddiebe
eddiebe's picture

That's right, the banksters want their money. Guess who'll pay up. That's right, us and our children and our childrens children.

Thu, 03/01/2012 - 09:48 | 2212149 eddiebe
eddiebe's picture

'The EMEA DC unanimously determined that the specific fact pattern referred to in the first submitted question does not satisfy either limb of the definition of Subordination as set out in the ISDA 2003 Credit Derivatives Definitions (the 2003 Definitions) and therefore a Restructuring Credit Event has not occurred under Section 4.7(a) of the 2003 Definitions.'

I take this to mean they are not calling it a default. ( Even though of course it is, but since when does that matter in this world of smoke and mirrors..... well of course til it all of a sudden does.)

Thu, 03/01/2012 - 09:21 | 2211999 TimmyM
TimmyM's picture

So banks and brokers can no longer claim net exposure on their paired book, right?
It's a Festivus miracle!

Thu, 03/01/2012 - 10:13 | 2212259 GMadScientist
GMadScientist's picture

Now for the "Airing of Grievances"...

Thu, 03/01/2012 - 09:22 | 2212018 Daedalus
Daedalus's picture

Thu, 03/01/2012 - 09:25 | 2212029 Daedalus
Daedalus's picture

Duplicate - Sorry

Thu, 03/01/2012 - 09:25 | 2212031 sudzee
sudzee's picture

If its printed, it don't really belong to you.

Thu, 03/01/2012 - 09:34 | 2212086 Dead Canary
Thu, 03/01/2012 - 09:37 | 2212096 eddiebe
eddiebe's picture

Looks to me the banksters are telling the Euro government boyz to cough it up, or else. Kind of what Paulsen pulled on congress a couple of years back.

Thu, 03/01/2012 - 09:42 | 2212117 Dr. Kananga
Dr. Kananga's picture

Those pesky fact patterns. They don't make 'em like they used to.

Thu, 03/01/2012 - 09:43 | 2212121 agent default
agent default's picture

After this fiasco, any fund manager still holding on to sovereign bonds, and looses as much as a penny even due to day to day volatility, should be sued for negligence.  That's it. This is a worse scam than the subprime.  It is confiscation of funds through governments under the pretense of restructuring and consent at gunpoint.  They are deadbeats, they are washouts, and stay away from their dodgy debt AND worthless paper money they call "legal tender".  They have become totally illegitimate.  All of them.  And look out below for the CDS and bond markets.

Thu, 03/01/2012 - 09:45 | 2212136 Loan Gunman
Loan Gunman's picture

Kyle Bass bought cds on MBS.  He has long since collected.  That was in the days when they still paid off.

Thu, 03/01/2012 - 09:50 | 2212158 Shibumi2
Shibumi2's picture

banzai...we need a SOUP NAZI, NO SOUP FOR YOU parody (from Seinfeld)





Thu, 03/01/2012 - 09:52 | 2212171 Seize Mars
Seize Mars's picture


Why even trade CDS?

Thu, 03/01/2012 - 09:55 | 2212180 azzhatter
azzhatter's picture

I'm not as up to speed on this as a lot of you guys but doesn't the unintended consequences of this actually make it worse than a credit event. Who would buy in the future?

Thu, 03/01/2012 - 10:02 | 2212210 Coldfire
Coldfire's picture

This is not a market, it's a crime scene. Boil the rope.

Thu, 03/01/2012 - 10:03 | 2212213 DogSlime
DogSlime's picture

Greek 1 Year yield just peaked at 920.  What a mess.


Thu, 03/01/2012 - 10:05 | 2212225 NEOSERF
NEOSERF's picture

Suspend disbelief plunges $100 for no reason, Central banks offer free money and 800 banks mosey to the trough, ISDA kills off the only thing that was balancing the ridiculous amount of gov debt so while it may not be a credit event it damn sure should be a ratings event.  Rating agencies should come down hard on anyone holding 'riskier" gov debt as clearly now it is NOT unhedged and stands to be marked down...and this is just the manipulation for this week

Thu, 03/01/2012 - 10:18 | 2212260 nathan1234
nathan1234's picture

IMHO , all CDS must be removed from the system.

The risk must be entirely that of the lenders. The Banksters need to loose their pants and assets for taking wrong decisions. The man on the street does not get bailed out for the mistakes he makes.

This is the only way the debt gets removed from the system and does not need a taxpayer bailout.


Thu, 03/01/2012 - 11:00 | 2212454 falak pema
falak pema's picture

unstructured collapse of the CDS market = Adios the TBTF cabal ! You head for nationaisation and Tombstone territory!

38T is no mean joke. If all naked OTC derivatives then get grilled, the banks LOSE their bread and butter on hot oligopoly toast! Man, its financial armageddon time!

Even Helicopter BEN and ECB Jerry will have a problem saving them!

Thu, 03/01/2012 - 10:20 | 2212290 chindit13
chindit13's picture

One would think this has the potential to destroy the CDS market and reprice all sovereign debt.  One would think.  One would also think that retro-CACs would discourage people from buying any sovereign debt, or at the very least people would demand a higher yield.

In point of fact, since the earliest talk of retro-CACs on Greek Law-issued debt, Italian 10-years have rallied 20%.  So much for pricing in additional risk, uncertainty, and unilaterally abrogated contracts.

As I have written previously, since most of the folks who buy sovereign debt are playing with OPM, their greater fear is losing a job over a missed rally rather than getting hammered in a default, since their peers---who also manage OPM---are already long and will also get hammered in the event of a default.

Thu, 03/01/2012 - 10:23 | 2212298 realitybiter
realitybiter's picture

Eventually, the rats feed on each other.

I'd like to see a flowchart pitting the screwer against the screwee.  winners and losers.


Does this alter the statement "the nearly quadrillion in derivatives net out to zero"?

I'm pretty sure the value of those CDS' that appeared very worthy has now crashed.


Once again, Brooksley Born is proven to still be worthy of her standing as top of her Stanford Law Class.

Thu, 03/01/2012 - 14:05 | 2213340 Raging Debate
Raging Debate's picture

+1,000 for Brooksley Born.

Thu, 03/01/2012 - 10:24 | 2212302 Scalaris
Scalaris's picture

I guess this will anger my CDS-long-only-fund clients.

Thu, 03/01/2012 - 10:28 | 2212317 neutrinoman
neutrinoman's picture

What I suspect is that the CDS market will be shown to be the scam that it always was. You pay for the "insurance," but it never pays out. (It was always more like gambling in any case, not insurance.)

Banks promoted derviatives in the 90s as a lucrative new market that got them out of declining profitability. Derivatives then became a linchpin of the shadow banking system and securitization, supposedly making all that risky stuff safe.

The derivatives market is probably going to collapse completely in the next couple years, leaving nothing of the shadow banking system. The rationale for bailing out AIG and any other seller of CDS is also erased.

Thu, 03/01/2012 - 10:59 | 2212457 Ned Zeppelin
Ned Zeppelin's picture

These MBA nitwits figured if you could parse off credit risk, such that theoretically the least creditworthy instrument on the planet could sell at par (at a low rate) since the "credit risk" component of the interest rate decision was handled in a separate transaction.  Trouble is, they did not provide for the regulation of these separate risk contracts, or police the ability to pay should the gamble prove to be a loser.  The private parties do try to handle it with various collateral being posted, or bad collateral, but you can bet your MBA diploma that the collateral is again rehypothecated elsewhere into a clusterfuck of incomprehensible proportions.

Sick minds let loose breed this sort of wealth extraction nonsense. Masters of the Universe.

Thu, 03/01/2012 - 11:32 | 2212633 Tristan
Tristan's picture

Oh..see. Yes, correct, Unanimously.

Thu, 03/01/2012 - 10:54 | 2212430 Ned Zeppelin
Ned Zeppelin's picture

I may be reading between the lines, but this is not the end of the questions that will arise as to whether a default has occurred, and in fact is only the opening round. It occurs to me that there will be many submissions of questions as the complexity of the deal increases, and the holders of the short ends of the sticks ponder their options. 

At this point in time, you can bet the authors of the Greek bailout deal have a copy of the ISDA definitions out on their desk and they are thinking through how they can draft the language of the PSI deal without ending up inside one of the carefully defined events that will trigger a default. 

Game not over. Just starting.


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