ISDA's Take On Lack Of Greek CDS Trigger: "We Think The Credit Event/DC Process Is Fair, Transparent And Well-Tested"

Tyler Durden's picture


Everyone's favorite banker-controlled CDS determining organization took offense to media reports saying it may be secretive, corrupt, and borderline manipulate if not worse. To wit: "In sum, we think the credit event/DC process is fair, transparent and well-tested.  There’s simply no evidence to the contrary.  Perhaps after today this non-secret secret will be a secret no more."

ISDA's petulant take in its entirety as follows:

Today we were treated to two news stories in two newspapers on one topic:  the process for determining whether a credit event has occurred with respect to Greek sovereign CDS.


On the one hand, there’s The Washington Post:  “For Greece, a critical conference call between London and New York.”  (A follow-up story is here.) On the other hand, there’s The Wall Street Journal’s “Hushed Up: Secret Panel Holds Fate of Greek CDS.”


An important part of the credit event process – and an important element in each story – are the ISDA Determinations Committees (DCs).  The DCs are 15-member panels of representatives from banks and investment firms.  A supermajority (12 of 15) of each DC’s members is required to make a determination.  Here’s how the Post describes the process and the DCs:


“The banks and other investors who buy and sell the swap contracts have agreed to the arrangement as a way to centralize what had been an ad hoc, company-to-company process of deciding whether a credit default swap payment was warranted.


“The committees are set up with competing interests in mind. The group meeting in London and New York on Thursday includes representatives of major European institutions like Deutsche Bank, as well as private investment funds like Blue Mountain Capital, that might have different points of view.


“A supermajority of 12 committee members is needed to make a determination either way, and if the panel deadlocks the issue would be sent to a new group of three outside arbiters. Some 59 cases have gone before ISDA committees so far without follow-up litigation, and only one has been referred to an outside panel.”


Contrast this with the Journal’s take.  First, there’s the headline about a “Secret Panel.”  The DCs are said to be “secretive” and “rarely elaborate on decisions.” “No outsiders can participate in the meeting…No transcript will be made public. When a decision is announced, expected before Monday, the committee doesn’t have to provide an explanation. There is no opportunity for investors to appeal.”  Critics “question the impartiality of the process.”


It’s a bit of a mystery why the story characterizes the process as so “secretive.”  The names of the firms on the DC are public, as are their votes.  The process by which the DC members are selected, and the rules governing the DCs, are also public.  Their decisions are publicly announced.  At times, public explanations for those decisions are provided, but often this does not appear to be necessary (such as when the vote is 15-0).


In addition, the process, as the Washington Post article notes, was built to address conflicts of interest.  The credit event/DC process has worked extremely well for 3+ years.  It has handled dozens of credit events without incurring a single legal challenge.  If a supermajority isn’t reached, the decision goes to a panel of outside experts.  A supermajority has not been reached only twice in all the times the DCs have agreed to consider a question.

Well, that takes care of that. ISDA is now certainly "fair, transparent, and well-tested", and for those who wrongfully feel that a 70%+ bond haircut could possible be an event of default, tough.

Anyone else who wishes to express their feelings on the matter, can respond on ISDA's blog site.

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Thu, 03/01/2012 - 17:29 | 2214606 Ahmeexnal
Ahmeexnal's picture

--the lynch mob

Thu, 03/01/2012 - 17:31 | 2214624 battle axe
battle axe's picture

ISDA IS FAIR  AND TRANSPARENT. BWHAAAAAA HAAAAAAA HAAAAAAAA. Those weasels are bought and paid for and are becoming a bigger joke then they  were already considered by all the trading desks....

Thu, 03/01/2012 - 17:36 | 2214646 bdc63
bdc63's picture

They had to have been laughing their asses off when they wrote that statement.


Thu, 03/01/2012 - 18:14 | 2214792 strannick
strannick's picture

Substitute 'CFTC Commisioners' for ISDA, and 'unbacked COMEX paper shorts' for CDS trigger. At least ISDA doesnt trot out Bart Chilton every month wringing his hands saying they are trying their best.

Eventually enough idiots will have been abused enough to abandon trading both.

Thu, 03/01/2012 - 18:27 | 2214854 Clint Liquor
Clint Liquor's picture

Bart Chilton needs a haircut and someone to hang a pair of balls on him.

Fri, 03/02/2012 - 02:31 | 2216020 SAT 800
SAT 800's picture

It's pathetic and transparent. It won't be long now, and everyone will know how "fair, Transparent, and Realistic" this process is.

Fri, 03/02/2012 - 02:31 | 2216021 SAT 800
SAT 800's picture

Yes, it's completely absurd. Propaganda; period.

Thu, 03/01/2012 - 18:16 | 2214810 Nascent_Variable
Nascent_Variable's picture

Of course, they're fair and transparent.  And, I'm sure the balance sheets of all those French banks that just took a bath will be adjusted properly with the non-credit event default..

Thu, 03/01/2012 - 21:21 | 2215348 Buck Johnson
Buck Johnson's picture

Another joke from the Western banking system.

Thu, 03/01/2012 - 17:36 | 2214650 SilverRhino
SilverRhino's picture

We think fucking over counterparties is fair, transparant and well tested.

Essentially they just told a bunch of rich people to go fuck themselves.     Wonder how long until the hit men are working on these miserable fucks?

Thu, 03/01/2012 - 17:37 | 2214657 maxmad
maxmad's picture

Like Ben F. said "their world is collapsing around them!"  Make the lies as big as you want them, you're time is running out!

Thu, 03/01/2012 - 17:53 | 2214735 FlyoverCountryS...
FlyoverCountrySchmuck's picture

"Make the lies as big as you want them, you're time is running out!"

As long as it lasts past U.S. Election Day 2012. That's ALL that matters. Can you just IMAGINE the daily media outrage we'd be treated were a REPUBLICAN President right now?

Thu, 03/01/2012 - 18:38 | 2214679 Widowmaker
Widowmaker's picture




Thu, 03/01/2012 - 17:43 | 2214685 tmosley
tmosley's picture

I prefer to hang them from the neck until dead, but that is just me.

Thu, 03/01/2012 - 17:50 | 2214726 MillionDollarBonus_
MillionDollarBonus_'s picture

OMG. Libertarians got absolutely owned by the ISDA!! LOL. My favorite part in response to the Wall Street Journal's typical right wing conspiratorial take:

"It’s a bit of a mystery why the story characterizes the process as so “secretive.”  The names of the firms on the DC are public, as are their votes.  The process by which the DC members are selected, and the rules governing the DCs, are also public.  Their decisions are publicly announced."


Thu, 03/01/2012 - 17:57 | 2214752 curbyourrisk
curbyourrisk's picture

You must be related to Harry Wagner

Thu, 03/01/2012 - 18:40 | 2214895 alien-IQ
alien-IQ's picture

You seem to be suffering from the delusional belief that if you behave sufficiently sycophantic towards the bankster oligarchy you will somehow be spared the ass fucking that is coming.

Not only does it make you look stupid, but it has the added advantage of exposing you as a cowardly pussy.


Thu, 03/01/2012 - 22:00 | 2215426 mendigo
mendigo's picture

you make a really good point - I for one value your insight.
Still the opening corrupt nature of it is a bit upsetting.
Do banks voluntarily forgive 70% of debt in your experience asshole.

Thu, 03/01/2012 - 18:07 | 2214780 johngaltfla
johngaltfla's picture

That should pretty much kill any faith at all in the credit markets.

Does this mean all the "old" GM bondholders who had CDS have to give their money back too?

F'in bastards.

Thu, 03/01/2012 - 17:28 | 2214607 Gene Parmesan
Gene Parmesan's picture

Is there a line at all if 70% isn't enough? 99%? Fractions of a percent?

Thu, 03/01/2012 - 17:28 | 2214608 john39
john39's picture

"trust us, we're bankers".

Thu, 03/01/2012 - 20:14 | 2215170 sgt_doom
sgt_doom's picture

Ya know, I was just reflecting on how much money Nicholas Brady and C. Fred Bergsten must have made ("earned" claim the cretins!!!) as counterparties to Lehmans and Bear Stearns through their shop, Darby Overseas Investments, when I recalled this about old C. Fred Bergsten, one of the co-founders of the Peterson Institute (whose agenda is to offshore ALL American jobs, end or privatized [steal] Social Security, Medicare and Medicaid, and worship the WTO Financial Services Agreement):

In 2007 C. Fred Bergsten resuscitated the idea of a Substitution Account through which SDRs might be substituted for dollar reserves as a way of allowing central banks to diversify out of dollars without precipitating a dollar crash, which might undermine confidence in U.S. financial markets.

Yup, one can always trust those banksters!

Thu, 03/01/2012 - 17:29 | 2214610 Gubbmint Cheese
Gubbmint Cheese's picture

another well tested process is throwing criminals in jail...

just thought I'd throw that one out there..

Thu, 03/01/2012 - 17:50 | 2214724 cossack55
cossack55's picture

Sorry, Cheese, that level of leniency is LONG gone.

Thu, 03/01/2012 - 17:29 | 2214611 101 years and c...
101 years and counting's picture

Excellent.  I will only pay 30% of my mortgage going forward, since all contract law is no longer valid and the borrowers can determine what they feel like paying back.  I hope all others will do the same.


Thu, 03/01/2012 - 17:39 | 2214667 LawsofPhysics
LawsofPhysics's picture

You might as well drop ALL insurance coverage while you are at it.  Apparently "moral hazard" is a make-believe word made up by "bad" people who wanted to scare children.

Thu, 03/01/2012 - 17:43 | 2214680 JPM Hater001
JPM Hater001's picture

I'm right behind you...but you still go first.

Thu, 03/01/2012 - 17:29 | 2214614 Conrad Murray
Conrad Murray's picture

For the old fashioned types, give them a call -

For a Determinations Committee contact, please email

Thu, 03/01/2012 - 17:31 | 2214620 bdc63
bdc63's picture


Thu, 03/01/2012 - 17:31 | 2214623 blu
blu's picture

How dare we question them! Why the nerve of some people.

Thu, 03/01/2012 - 17:31 | 2214625 Comay Mierda
Comay Mierda's picture

the lawyers are salivating over this ruling

Thu, 03/01/2012 - 17:31 | 2214627 LongSoupLine
LongSoupLine's picture

plain and simple corrupted horseshit.

The end.

Thu, 03/01/2012 - 17:44 | 2214689 JPM Hater001
JPM Hater001's picture

Sadly no one buying the CDS bothered to see who would rule on the judgement.

Caveat Emptor bitchez.

Thu, 03/01/2012 - 17:32 | 2214628 eBuddha
eBuddha's picture

what do they think have Luke Skywalker's Force:  MOVE ALONG.....

Thu, 03/01/2012 - 17:32 | 2214629 czarangelus
czarangelus's picture

This slapstick would be the best show on television if it weren't so damned expensive. :-/

Thu, 03/01/2012 - 17:33 | 2214637 mayhem_korner
mayhem_korner's picture

Fair, Transparent and Well-Tested


That's what's printed on the side of a Trojan-brand box, no?

Thu, 03/01/2012 - 19:42 | 2215077 JPM Hater001
JPM Hater001's picture

Yes, and I have always wondered who the chap is that keeps a hard-on all day to test every condom...Thats some serious staying power.

Thu, 03/01/2012 - 17:36 | 2214649 LawsofPhysics
LawsofPhysics's picture

...and gravity will be outlawed shortly.  All is well.   Rrriiiigggghhht.

Thu, 03/01/2012 - 18:48 | 2214921 resurger
resurger's picture


I think Isaac Newtons law is a hoax!

For every action, there is .... reaction

who the fuck needs math anyway.

Fuck Math & Physics

Thu, 03/01/2012 - 17:36 | 2214652 magpie
magpie's picture

Only 3.5 Billion $ were stolen uh lost during this non-credit event.

Thu, 03/01/2012 - 17:46 | 2214695 americanspirit
americanspirit's picture

It vaporized. Just like that - poof - it was gone. It was amazing.

Thu, 03/01/2012 - 19:43 | 2215079 JPM Hater001
JPM Hater001's picture

I was just alerted this vaporization was only transitory.

Thu, 03/01/2012 - 17:38 | 2214663 surf0766
surf0766's picture

I am Baghdad Bob.  You are Baghdad Bob. We all are Baghdad Bob.

Thu, 03/01/2012 - 17:52 | 2214664 Mercury
Mercury's picture

Not a bad credit event auction primer if anyone needs a walk-through:

You know, just in case an actual credit event is ever again allowed to happen...

Thu, 03/01/2012 - 17:39 | 2214670 alien-IQ
alien-IQ's picture

"In sum, we think the credit event/DC process is fair, transparent and well-tested.  There’s simply no evidence to the contrary.  Perhaps after today this non-secret secret will be a secret no more."


This sounds like they are daring ZH to prove them wrong. (although it could be argued that such has already been accomplished).


Perhaps it's time to take these fuckers to the woodshed in a very humiliating manner?

Thu, 03/01/2012 - 18:12 | 2214800 Conrad Murray
Conrad Murray's picture

I wonder how much information could be found on the following people via Facebook, LinkedIn, Spokeo, Property records, tax records, etc.

Thu, 03/01/2012 - 17:40 | 2214673 Mysteerious Roo...
Mysteerious Rooshian Vooman's picture

I am here.

Thu, 03/01/2012 - 17:43 | 2214681 Dead Canary
Dead Canary's picture

Come on guys, the system is well tested and works perfectly. Have any bankers gone to jail yet? No. See, it works just fine.

Thu, 03/01/2012 - 17:44 | 2214686 LULZBank
LULZBank's picture

More worrying thing is when this kind of attitude seeps into everyday life and among "common" people. e.g.  Bosses telling dumb lies to their subordinates and expecting them to believe them. Anyone who questions is chastised immediately as unfriendly and a non-team player. WTF?!

Thu, 03/01/2012 - 17:47 | 2214706 Amish Hacker
Amish Hacker's picture

I hope lots of ZH-ers will make use of the link above to express their opinions directly to the ISDA.

How would you feel if your house burned down, and the insurance adjuster claimed that, since the chimney was still standing, there couldn't possibly have been a fire?

Do NOT follow this link or you will be banned from the site!