This page has been archived and commenting is disabled.

It's Official: S&P Cuts Greece To (Selective) Default From CC

Tyler Durden's picture


Translation: Greece better have that PSI in the bag or else the "Selective" goes away and "Greece would face an imminent outright payment default." Our question for former Goldmanite and current ECB head Mario Dragi: does the ECB allow defaulted bonds to be pledged as collateral within the Euro System?

From S&P

Greece Ratings Lowered To 'SD’ (Selective Default)

Rating Action
On Feb. 27, 2012, Standard & Poor's Ratings Services lowered its 'CC'  long-term and 'C' short-term sovereign credit ratings on the Hellenic Republic  (Greece) to 'SD' (selective default).

Our recovery rating of '4' on Greece's foreign-currency issue ratings is  unchanged. Our country transfer and convertibility (T&C) assessment for  Greece, as for all other eurozone members, remains 'AAA'.


We lowered our sovereign credit ratings on Greece to 'SD' following the Greek government's retroactive insertion of collective action clauses (CACs) in the documentation of certain series of its sovereign debt on Feb. 23, 2012. The effect of a CAC is to bind all bondholders of a particular series to amended bond payment terms in the event that a predefined quorum of creditors has agreed to do so. In our opinion, Greece's retroactive insertion of CACs materially changes the original terms of the affected debt and constitutes the launch of what we consider to be a distressed debt restructuring. Under our criteria, either condition is grounds for us to lower our sovereign credit rating on Greece to 'SD' and our ratings on the affected debt issues to 'D'.

As we have previously stated, we may view an issuer's unilateral change of the original terms and conditions of an obligation as a de facto restructuring and thus a default by Standard & Poor's published definition (see "Retroactive Application Of Collective Action Clauses Would Constitute A Selective Default By Greece," Feb. 10, 2012, and "Rating Implications Of Exchange Offers And Similar Restructurings, Update," May 12, 2009). Under our criteria, the definition of restructuring includes exchange offers featuring the issuance of new debt with less-favorable terms than those of the original issue without what we view to be adequate offsetting compensation. Such less-favorable terms could include a reduced principal amount, extended maturities, a lower coupon,  different payment currency, different legal characteristics that affect debt service, or effective subordination.

We do not generally view CACs (to the extent that they are included in an original issuance) as changing a government's incentive to pay its obligations in full and on time. However, we believe that the retroactive insertion of CACs will diminish bondholders' bargaining power in an upcoming debt exchange. Indeed, Greece launched such an exchange offer on Feb. 24, 2012.

If the exchange is consummated (which we understand is scheduled to occur on or about March 12, 2012), we will likely consider the selective default to be cured and raise the sovereign credit rating on Greece to the 'CCC' category, reflecting our forward-looking assessment of Greece's creditworthiness. In this context, any potential upgrade to the 'CCC' category rating would inter alia reflect our view of Greece's uncertain economic growth prospects and still large government debt, even after the debt restructuring is concluded.

If a sufficient number of bondholders do not accept the exchange offer, we believe that Greece would face an imminent outright payment default. This is because of its lack of access to market funding and the likely unavailability of additional official financing. The revised financial assistance program provided by most of the eurozone governments and the Stand-By Credit Arrangement with the International Monetary Fund are predicated on a successful exchange offer.

Our T&C assessment for Greece, as for all other eurozone members, is 'AAA'. A T&C assessment reflects our view of the likelihood of a sovereign restricting nonsovereign access to foreign exchange needed to satisfy the nonsovereign's debt-service obligations. Our T&C assessment for Greece expresses our view of the low likelihood of the European Central Bank restricting nonsovereign access to foreign currency needed for debt servicing.

If Greece were to withdraw from eurozone membership (which is not our base-case assumption) and introduce a new local currency, we would reevaluate our T&C assessment on Greece to reflect our view of the likelihood of the Greek sovereign and its central bank restricting nonsovereign access to foreign exchange needed for debt service. Contrary to the current case, in this scenario, the euro would be a foreign currency, and the Bank of Greece would no longer be part of the European System of Central Banks. As a result, under our criteria, the T&C assessment can be at most three notches above the foreign-currency sovereign credit rating.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 02/27/2012 - 17:32 | 2201720 Sudden Debt
Sudden Debt's picture

And spain's deficit for 2011 is 8,5% instead of the projected 6%....

Mon, 02/27/2012 - 17:34 | 2201733 maxmad
maxmad's picture

Let it collapse, bitchez!

Mon, 02/27/2012 - 17:37 | 2201749 brewing
brewing's picture


Mon, 02/27/2012 - 17:44 | 2201780 The Big Ching-aso
The Big Ching-aso's picture



CACs should be renamed more appropriately to CACAs.

Mon, 02/27/2012 - 17:45 | 2201795 JPM Hater001
JPM Hater001's picture

It just occured to me the algo's missed what the Austrian in all of us tweeted last week.

Default bitchez...

Can't wait to see how the Algo's like that tomorrow.  Probably a chance to stay about 13000...maybe 1350 close?

Bullish, definitely.

Mon, 02/27/2012 - 18:11 | 2201902 Ahmeexnal
Ahmeexnal's picture

Make that....Schroedinger's Default

Not a default if you are holding CDS!

Mon, 02/27/2012 - 19:26 | 2202063 Thomas
Thomas's picture

CDS owners will experience consummation as well

Mon, 02/27/2012 - 17:50 | 2201823 LookingWithAmazement
LookingWithAmazement's picture

Collapse won't come. Euro will be saved again this week, both by the ECB's new LTRO as well as by the Euroministers, who pile up some 750 or even 1000 billion euros in the new ESM. Forget the ritual protests coming out of Germany. Markets will rally. Bye bye crisis. No eurocollapse. Told you so, many times. Boring world we live in.

Mon, 02/27/2012 - 17:53 | 2201844 EscapeKey
EscapeKey's picture

"Hyperinflations are always caused by public budget deficits which are largely financed by money creation."

-Peter Bernholz, "Monetary Regimes & Inflation".

Mon, 02/27/2012 - 18:22 | 2201933 kanenas
kanenas's picture

True, if and when the money printed enters the real world market. As long as it stays in the books no hyperinflation will be experienced.

Can you explain why US/EUR is not already experiencing hyperinflation with all the printing that has been going on?

Mon, 02/27/2012 - 19:53 | 2202128 flacon
flacon's picture

Can you explain why US/EUR is not already experiencing hyperinflation with all the printing that has been going on?


The velocity of money is too low. 

Mon, 02/27/2012 - 17:41 | 2201771 kaiten
kaiten's picture

Dont panic, the higher, the better. Just look at US.

Mon, 02/27/2012 - 17:43 | 2201782 Sudden Debt
Sudden Debt's picture

Yeah but you guys have all that "hidden" gold in the grand canyon....

Mon, 02/27/2012 - 17:45 | 2201796 cossack55
cossack55's picture

SSSSSSShhhhhhhhhhhhh!!!!!! It's a secret.

Mon, 02/27/2012 - 17:47 | 2201804 TruthInSunshine
TruthInSunshine's picture

Buy the subordinate, subserviant & junior dips.

Mon, 02/27/2012 - 21:36 | 2202334 lotsoffun
lotsoffun's picture

het spijt mij.  i can't help myself.  who is going to pay out.  yo mama.  she's in LA now helping out with the oscars.  god bless obama, i think he is due a second nobel now for his insightful  diplomacy in the the middle and near east.

(not that rimney would be any better... what a shame)


Mon, 02/27/2012 - 17:51 | 2201826 Robslob
Robslob's picture


Tue, 02/28/2012 - 07:58 | 2203162 Overflow-admin
Overflow-admin's picture


Mon, 02/27/2012 - 17:33 | 2201722 Irish66
Irish66's picture

ISDA meeting is Wednesday

Mon, 02/27/2012 - 17:35 | 2201739 Tyler Durden
Tyler Durden's picture

The ISDA meeting on Wednesday has to do with whether the ECB's singlehanded and illegal CAC-enabling (of its own bonds) prearranged exchange offer can be found as a CDS trigger. It won't be and is a big waste of time as ISDA is controlled by the same banks that stand to lose if CDS are triggered.

Mon, 02/27/2012 - 17:36 | 2201747 Sudden Debt
Sudden Debt's picture

Is there small print to allow them to do that?

Mon, 02/27/2012 - 17:57 | 2201854 illyia
illyia's picture

Big Print: TBTF

Mon, 02/27/2012 - 17:39 | 2201755 EscapeKey
EscapeKey's picture

Right, that's it. Let's start an insurance company, which never pays out. Your house burns down? Not a credit event. Your car was broken into? Not a credit event.

Who's with me? All we need to do is lobby the elected. Can probably be done on the cheap if we resort to prostitutes (lobby prostitutes with... prostitutes, some would say) and extortion.

Mon, 02/27/2012 - 17:42 | 2201768 Sudden Debt
Sudden Debt's picture

So who is going to pay out my "end of the world" insurance in 2013 if the world ends in december 2012?

Mon, 02/27/2012 - 17:42 | 2201778 mayhem_korner
mayhem_korner's picture



I've got a case of 1945 single-malt set aside just for you, SD.

Mon, 02/27/2012 - 18:01 | 2201869 EscapeKey
EscapeKey's picture

Well, tell you what. It just so happens underwriting that is entirely within the scope of the business plan.

Do you wish to take the platinum pro package, with 24 hour access to our telemarkete... er I mean insurance professionals?

Mon, 02/27/2012 - 21:25 | 2202319 UP Forester
UP Forester's picture

Are your telemarkete... er, I mean insurance professionals, all named Steve, instead of Rajib, Ramakrishna, Gopi, etc.?

If they are, sign me up.

Mon, 02/27/2012 - 17:52 | 2201838 HardlyZero
HardlyZero's picture

Buffet Hormones...or was that hoar moans ?

Mon, 02/27/2012 - 17:54 | 2201847 mayhem_korner
mayhem_korner's picture



I think "hoar" is some kind of frost, bub. 


Mon, 02/27/2012 - 17:58 | 2201861 HardlyZero
HardlyZero's picture

oops  "whore"

Mon, 02/27/2012 - 18:40 | 2201977 ShankyS
ShankyS's picture

Not to be confused with a certain CNBS anchor. 

Mon, 02/27/2012 - 17:39 | 2201759 mayhem_korner
mayhem_korner's picture

a big waste of time as ISDA is controlled by the same banks that stand to lose if CDS are triggered.


Bingo.  The link:

and the members of the Europe Credit Determinations Commitee

Mon, 02/27/2012 - 17:39 | 2201760 Irish66
Irish66's picture

I know who they are and I'm gonna be an optimist and say we get to pull the trigger this time.

I took my pills today.

Mon, 02/27/2012 - 18:30 | 2201952 noses
noses's picture

Pulling the trigger will not help any more – they do own the bullets by now.

Mon, 02/27/2012 - 17:48 | 2201811 tickhound
tickhound's picture

"a big waste of time as ISDA is controlled by the same banks that stand to lose if CDS are triggered."

And there it is folks... initials subject to change.

Mon, 02/27/2012 - 17:59 | 2201864 YesWeKahn
YesWeKahn's picture

I have been thinking the same thing. CDS is designed to make money, not losing money.

These banks made sure that they have their men elected to the ECB and other "important positions" to make money off the people.

Mon, 02/27/2012 - 21:25 | 2202318 lotsoffun
lotsoffun's picture

cds is designed to make money for the SELLERS - as they collect over time and NEVER are going to pay out, as they pack up shop, declare bankruptcy and move on.  i'm getting old now, and i realize that's the way it is.  anybody writing insurance has no itention to actually pay at any point.  may pay from time to time, but not when it gets hit big.  sorry.  reality.


Mon, 02/27/2012 - 19:09 | 2202017 dwayne elizando
dwayne elizando's picture

Tyler, who's the largest holder of greek CDS and bonds?

Mon, 02/27/2012 - 17:36 | 2201746 maxmad
maxmad's picture

This will trigger it!   "Clean up on isle 4"

Mon, 02/27/2012 - 17:41 | 2201774 mayhem_korner
mayhem_korner's picture didn't go in.  Just impacted on the surface. 

(Red Leader, Star Wars)

Mon, 02/27/2012 - 17:43 | 2201784 JohnnyBriefcase
JohnnyBriefcase's picture

That's awesome.

Mon, 02/27/2012 - 17:40 | 2201764 bank guy in Brussels
bank guy in Brussels's picture

Goldbug guru Jim Sinclair gave a major rant the other day on ISDA and Greece. He was totally cranked about the ISDA committee likely opining that a Greek PSI so-called agreement for a Greek haircut of 50 % - 70 % or more was not a default 'credit event'

Jim thinks this is a big event, which he sees as (1) essentially admitting that the major US banks are insolvent (because they write most CDS) and (2) necessitating 'QE to infinity', endless money-printing to cover up for those banks. 'QE to infinity' is Jim's favourite theme and prediction, with a shiny future of gold amid hyperinflation.

Sinclair called ISDA ... somewhat over-the-top:

"The most powerful body in the financial world ... This organization supersedes all governments and central banks today in terms of the financial power they edict."

As if they were the Bilderbergers, Trilaterial Commission, Rothschilds etc. all rolled into one.

Jim's rant on ISDA is both audio, and in text form here:

Mon, 02/27/2012 - 17:49 | 2201819 Irish66
Irish66's picture

Will be interesting to see what he says tonight

Mon, 02/27/2012 - 17:53 | 2201841 Tyler Durden
Tyler Durden's picture

Actually Jim is completely wrong as the trade off to not triggering CDS is the loss of faith in CDS as a hedging mechanism (discussed here many times). While it may appear trivial to those who enjoy vacuous hyperbole with no clue how bond hedging actually works, having the only possible hedge to a long position be "selling" (as was seen in the fall with Italian BTPs) is a far worse outcome to the ISDA constituent banks than having what they believe will be a one off event (that this is wrong is a different story), if it will reinforce bond buying in the other peripheral European countries if said buying can be hedged with somewhat credible derivatives.

Mon, 02/27/2012 - 17:58 | 2201860 mayhem_korner
mayhem_korner's picture



Newton's law.  Nice insight.

Mon, 02/27/2012 - 18:04 | 2201880 illyia
illyia's picture

Second most interesting thing I've read on ZH this week including the weekend.

This was the first most interesting:

Mon, 02/27/2012 - 18:06 | 2201886 CClarity
CClarity's picture

I'm actually cluing into a sense that some of the top bankers comfort in the sheeples compacency is starting to fray.  The bankers are starting to experience fear themselves.

Mon, 02/27/2012 - 18:10 | 2201898 kaiserhoff
kaiserhoff's picture

somewhat credible derivatives.

And therein lies a whole species of madness, not unlike what just happened with "mortgage insurance."

Otherwise sentient people, lying to regulators, auditors, and themselves about insurance they don't have and never had.  This has nothing to do with investment, but a lot to do with mass hysteria and the madness of crowds.


Mon, 02/27/2012 - 18:12 | 2201903 EscapeKey
EscapeKey's picture

Well, if you're big enough, alternatively you could start rapidly accumulting HUGE amounts of PIIGS debt, and then extort bailouts repeatedly when the price of the bonds inevitably start dropping. Or pledge it as collateral with some entity stupid enough to accept it - like the ECB.

Regardles, it's not as if the taxpayer will have a say, anyway.

Mon, 02/27/2012 - 18:22 | 2201931 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Yes, the fire insurance is no longer good after the house burnt to the ground. Insurance companies say so. This whole flaming pile of crap will go down because those investors who bought the CDS will be instantly wiped out. Instant panic as they are forced to liquidate all their investments whether they can or can not. Failure will result in bankruptcy.

Mon, 02/27/2012 - 18:37 | 2201965 kaiserhoff
kaiserhoff's picture

Just a matter of time, but thanks to their own actions, even less time. 

What the Tylers see is hard to explain.  CDS was never a rational reason for a hedge.  It was always too problematic, too conflicted.  It was just an excuse to do what a few fools like Corzine wanted to do, which is "damn the torpedoes,  U'm gonna chase yield."

Well, they just shot the last excuse of the greatest fools.  Good luck with that.

Mon, 02/27/2012 - 19:40 | 2202099 giovanni_f
giovanni_f's picture

Valid. But: Could it be that they will decide it to be neither a default nor a non-default? Both options are inacceptable to them. They will try to avoid a binary decision as long as possible. It will be interesting to see what syntax they come up with in explaining their wiggling out .

There will be settlements behind the scenes.

Tue, 02/28/2012 - 02:35 | 2202908 malek
malek's picture

 is a far worse outcome

If there were any honesty, logic, consequences or equal rule of law left, I would agree.

In today's world I strongly disagree. See the "terrible" outcome of MF Global.

And I forecast James Carville will reconsider his famous quote before this is over, I hope he will live to see it.

Mon, 02/27/2012 - 17:33 | 2201723 citta vritti
citta vritti's picture

how about KY instead?, bitchez

Mon, 02/27/2012 - 17:37 | 2201748 Jacque Itch
Jacque Itch's picture

Not needed.  Blood is a natural lubricant.

Mon, 02/27/2012 - 17:33 | 2201726 JohnnyBriefcase
JohnnyBriefcase's picture

Nobody saw this coming.

Mon, 02/27/2012 - 17:34 | 2201727 BeachBanker007
BeachBanker007's picture

NOW do CDS get triggered???

Mon, 02/27/2012 - 17:35 | 2201738 maxmad
maxmad's picture

ISDA has no choice now!!!!  CAC's triggered!!

Mon, 02/27/2012 - 17:35 | 2201740 EscapeKey
EscapeKey's picture

A bankruptcy is only a credit event if it favours the politically connected.

Mon, 02/27/2012 - 17:34 | 2201731 EscapeKey
EscapeKey's picture

Selective default is investment grade when we talk pension funds, right?

Mon, 02/27/2012 - 17:37 | 2201745 Black Forest
Black Forest's picture

Yes, absolutely trustworthy.

Mon, 02/27/2012 - 17:36 | 2201736 JimmyTheHand
JimmyTheHand's picture

Selective Default - that the same as when I put all the bills into a hat and only pay the first two that I pull out?  Can I call up the bastards I owe money to and say "I'm in selective default and guess what... you were selected."

Mon, 02/27/2012 - 17:43 | 2201787 redpill
redpill's picture

Congratulations!!!  You're the next lucky bondholder contestant on the Price of Default!

Mon, 02/27/2012 - 17:35 | 2201741 taniquetil
taniquetil's picture

When even the S&P is saying your bonds are junk, you know you have a real problem.

Mon, 02/27/2012 - 17:38 | 2201754 Sudden Debt
Sudden Debt's picture

What did the greeks expect since they "forgot" to pay for the s&p ratings?

Mon, 02/27/2012 - 17:46 | 2201802 taniquetil
taniquetil's picture

I'm assuming by "forgot" you mean "ran out of ink to print the money with which they were going to pay the bills"


I know that the word "Seigniorage" doesn't get used that much any more, but I'm long ink and long Xerox printers.

Mon, 02/27/2012 - 18:17 | 2201915 kaiserhoff
kaiserhoff's picture

SD, you are clearly a man with a plan, on the inside of varied and sundry excellent adventures.

(How much for a triple A?  I've got a bridge to sell;)

Mon, 02/27/2012 - 21:30 | 2202325 UP Forester
UP Forester's picture

Ask MNDOT....

Mon, 02/27/2012 - 21:18 | 2202306 lotsoffun
lotsoffun's picture

s&p loved merrill lynch's stanley o'neal AAA rated cdo's even after an 8 billion dollar right down.  they got it right in the end, but it took a few minutes.


Mon, 02/27/2012 - 17:36 | 2201744 JPM Hater001
JPM Hater001's picture

This just out of Greece- "Naner naner na na.  You cant catch me I'll never be cau-"

Mon, 02/27/2012 - 17:37 | 2201750 Piranhanoia
Piranhanoia's picture

Are you threatening me?

Mon, 02/27/2012 - 17:41 | 2201769 lolmao500
lolmao500's picture



Mon, 02/27/2012 - 17:42 | 2201775 JohnnyBriefcase
JohnnyBriefcase's picture

Shit just got REAL...



Mon, 02/27/2012 - 17:47 | 2201808 mayhem_korner
mayhem_korner's picture



LOL!  You and Long Soup Lines are my #1 and #1A best deadpanners on ZH.

Mon, 02/27/2012 - 17:51 | 2201827 citta vritti
citta vritti's picture

don't forget MDB

Mon, 02/27/2012 - 17:55 | 2201850 mayhem_korner
mayhem_korner's picture



...just plum slipped ma mind.  Thx.


Mon, 02/27/2012 - 17:43 | 2201785 the not so migh...
the not so mighty maximiza's picture

But but But Germany bailed them out

Mon, 02/27/2012 - 17:44 | 2201788 surf0766
surf0766's picture

China 8 times.

Mon, 02/27/2012 - 17:45 | 2201797 adr
adr's picture

Hey don't trample all over the party, Priceline just crossed $600 after hours on its way to $10k a share!!!!

The farce may never end. As long as corporate accounting can just plug any number they want in a calculator without fear. The rules will only be applied once the wealthy transfer their holdings to the sucker. You'll all of a sudden see regulations kick in, mark to market, and the rest just to collapse the market and allow the wealthy to buy everything back at 90% off.

It's bullshit, everyone knows it. They just need Mr. Retail investor to hold the bag. I just read an article how main street picks the wrong time to invest every time. If they come back in the market that actually means there will be a massive crash soon after.


That has and always wil be the plan.

Mon, 02/27/2012 - 17:50 | 2201821 EscapeKey
EscapeKey's picture

It absolutely is the plan.

Somewhere in the region of 50% of all new floats in France in the early part of last century were scams. Outright scams. But strangely, this history is completely forgotten (Carroll Quigley has a section on it in "Tragedy & Hope").

Bernie Madoff said that he quickly realized the markets were a scam, and that you had to be an insider to make money. Why would he lie?

Mon, 02/27/2012 - 20:32 | 2202232 sodbuster
sodbuster's picture

The sad thing is, Bernie is probably more credible than the scum running the show!!

Mon, 02/27/2012 - 17:46 | 2201801 Cursive
Cursive's picture


Mon, 02/27/2012 - 17:46 | 2201807 eddiebe
eddiebe's picture

fund managers are so desperate to be lied to that as long as ISDA uses words like haircut instead of the dread DEFAULT ( oh god, did I really just say that) the ahem haircut will nary cause a ripple.

 Since the whole fractional reserve and derivative hypothecation and re ad infinitum hypothecation scheme worked so beautifully, why wouldnt  a lousy greek haircut?

Mon, 02/27/2012 - 17:48 | 2201809 carbonmutant
carbonmutant's picture

Degrees of default...

or how to have a default without triggering a credit event.

Mon, 02/27/2012 - 18:48 | 2201990 kaiserhoff
kaiserhoff's picture

just a little bit preggers...

Mon, 02/27/2012 - 17:49 | 2201817 hyper-critical
hyper-critical's picture

Alright, so we have another date to fret about: March 12th. Or March 12th-ish.

Fuck Europe. Had drinks with a few people involved in the European diplomatic scene last night. Not one of them has any idea what the fuck is about to go down.


Mon, 02/27/2012 - 17:50 | 2201820 NotApplicable
NotApplicable's picture

"We do not generally view CACs"


Mon, 02/27/2012 - 17:52 | 2201829 eatthebanksters
eatthebanksters's picture

So you're saying it's all rigged? No way! Bawahhahahaaaahaaaaaa!

Mon, 02/27/2012 - 17:51 | 2201831 The Onion Of Tw...
The Onion Of Twickenham's picture

Sorry guys, but nobody gives a flying fuck what S&P say.


S&P can claim that the moon's a balloon but the markets don't give a rat's arse. All that matters to the markets is that LTRO 2.0 is on its way, Merkel had a good fart when she woke up this morning and the sheeple are starting to get that old fashioned equity religion.

Mon, 02/27/2012 - 19:29 | 2202072 giovanni_f
giovanni_f's picture


Mon, 02/27/2012 - 21:56 | 2202387 chump666
chump666's picture

Yes we do.  ECB is relying on the EZ banks to keep buying PIIGS bonds - that's the trade off with the LTRO money pump.  Problem is, Europe is flapping about in oil inflation add that to PIIGS economies that are sick and dying.  So, who in their right mind (except for the madmen at the ECB) would buy that debt?  No one.  So it will be dumped.  Thus yields will blow out and freak out equities despite the LTRO.  It has been priced in via the rangy trading last few session.

Europe is about to descend into a world of hurt again once their bond markets look sh*t once more.  S&P will start downgrading again.  Central banks should and are not last min bond buyers because they distort the bond market/prices with money printing (inflation).

It begins.

Mon, 02/27/2012 - 17:53 | 2201839 YesWeKahn
YesWeKahn's picture

"does the ECB allow defaulted bonds to be pledged as collateral within the Euro System?"

Of course it does. At this point, insanity, fraud, stupidity are too kind to describe the ECB and FED officials.

Tue, 02/28/2012 - 07:22 | 2203133 Instant Wealth
Instant Wealth's picture

Since the downgrade, the ECB doesn't accept greek bonds anymore as collateral - "on a temporary basis" ... *rolleyes*

Mon, 02/27/2012 - 17:53 | 2201843 valley chick
valley chick's picture

  quote:    Our question for former Goldmanite and current ECB head Mario Dragi: does the ECB allow defaulted bonds to be pledged as collateral within the Euro System?

My head is spinning and trying to understand and hoping someone can help..either with a blue pill or help me understand this.  With a controlled default (IMHO, is bs) a trigger can not happen?  I would think that if bonds are junk and can not pledge as collateral then a trigger could happen? 



Mon, 02/27/2012 - 18:47 | 2201984 JLee2027
JLee2027's picture

One would think that the (hundreds of) bank(s) who accepted said (defaulted) bond(s) as collateral may be calling the loan in a panic.  Yup, this could mushroom nicely.

No credit event needed.

Mon, 02/27/2012 - 19:35 | 2202088 valley chick
valley chick's picture

Thanks JLee2027 :)

Tue, 02/28/2012 - 08:09 | 2203175 Overflow-admin
Overflow-admin's picture


Mon, 02/27/2012 - 17:54 | 2201845 Jlmadyson
Jlmadyson's picture

Here we go. Credit event right around the corner. They strung it out as long as they could.

Time to pay the piper.

Mon, 02/27/2012 - 17:56 | 2201852 John Wilmot
John Wilmot's picture

"There was every reason to believe I was heading for trouble, that I'd pushed my luck a bit far. I'd abused every rule [international finance] lived by—burning the locals, abusing the tourists, terrifying the help. The only hope now, I felt, was the possibility that we'd gone to such excess, with our gig, that nobody in a position to bring the hammer down on us could possibly believe it . . . When you bring an act into this town, you want to bring it in heavy. Don't waste any time with cheap shucks and misdemeanors. Go straight for the jugular. Get right into felonies. The mentality of [international finance] is so grossly atavistic that a really massive crime often slips by unrecognized."

Lucifer "Raoul Duke" Pop-a-demos, Fear and Loathing in Athens

Mon, 02/27/2012 - 22:03 | 2202400 alex_g
alex_g's picture

was thinking about re-reading Hells Angels for what must be the 10th time...

Tue, 02/28/2012 - 08:10 | 2203177 Overflow-admin
Overflow-admin's picture

As long as *lolcats* aren't injured in the process...

Mon, 02/27/2012 - 18:00 | 2201862 slackrabbit
slackrabbit's picture

the greeks still have enough money for fake moustaches


Mon, 02/27/2012 - 18:03 | 2201873 John Wilmot
John Wilmot's picture

Moustaches are a no no in their new profession, tickles the clientele.

Mon, 02/27/2012 - 18:00 | 2201863 JimmyTheHand
JimmyTheHand's picture

I guess they finally ran out of that "Grecian Formula".....

Mon, 02/27/2012 - 17:59 | 2201865 frieswiththat
frieswiththat's picture

Selective Default is that like a little pregnant? Either way its still full tilt fucked up!

Mon, 02/27/2012 - 18:00 | 2201867 JimmyTheHand
JimmyTheHand's picture


Mon, 02/27/2012 - 18:06 | 2201883 slackrabbit
slackrabbit's picture






Tue, 02/28/2012 - 07:09 | 2203123 Instant Wealth
Instant Wealth's picture

Ratings seem to be a sort of infinitesimal calculus, these days. 

Mon, 02/27/2012 - 18:04 | 2201876 mayhem_korner
mayhem_korner's picture



Them Ides-o-March are lookin' fiesty.

Mon, 02/27/2012 - 18:06 | 2201884 Jlmadyson
Jlmadyson's picture

Been saying it for a long time.

Mon, 02/27/2012 - 18:09 | 2201892 Dow 36000
Dow 36000's picture

This means stocks will go up...right?

Mon, 02/27/2012 - 18:20 | 2201920 John Wilmot
John Wilmot's picture

what else?

Mon, 02/27/2012 - 21:44 | 2202355 Jake88
Jake88's picture

just buy the fucking dips

Mon, 02/27/2012 - 18:19 | 2201922 jose.six.pack
jose.six.pack's picture

sons of goldmanitches will twist it and stretch it as much as they like... avoid any trigger even if bonds are junk.

Mon, 02/27/2012 - 18:27 | 2201932 slewie the pi-rat
slewie the pi-rat's picture

<~~~  Yes!  [w/ a CDS from a zombie bank]

<~~~  No!  [these go to the FED]

Q:  does the ECB allow defaulted bonds to be pledged as collateral within the Euro System, BiCheZ?

Mon, 02/27/2012 - 18:25 | 2201939 lolmao500
lolmao500's picture

Time to start a war to distract the sheeple.

Will Syria do? Or will it take Iran?

Mon, 02/27/2012 - 18:25 | 2201945 LookingWithAmazement
LookingWithAmazement's picture

Greece (Selective) Default.

And now, Credit Event? CDS-trigger? Total Collapse? Or complete silence? Let me guess. Boring world we live in.

Mon, 02/27/2012 - 18:40 | 2201960 falak pema
falak pema's picture

I wouldn't be so sure. This event is now making Germany realise that if the Greek Situation does not stabilise they will be so hocked they will have a huge GDP shrinkage of over 3% potentially by having to cough up more. The G20 meeting in Mexico made this very clear. ESM has to increase by 500 B at least!

Merkel has said NO to that. So now if the feeling is Greece is still in the frying pan Germany may STILL want to pull out!

This week and next stays crucial as we come into Ides of March!

Don't count your chickens yet. Germany may still pull the plug on Greece and therefore on Euro zone!

I am not sure we are out of the woods still, even for 2012 in Euro zone. 

Mon, 02/27/2012 - 20:00 | 2202144 hyper-critical
hyper-critical's picture

Germany pulling the plug on Greece doesn't mean it's pulling the plug on the Eurozone. In fact, I think it's quite the opposite.

I'm convinced this is all about getting the Greeks to leave on their own. Spain and Italy are still the real problems, and throwing out Greece gives the German people just enough red meat to keep them from saying anything when the real bailout emerges.

We're still very early in this tragi-comedy.

Mon, 02/27/2012 - 18:32 | 2201957 TigerTrail
TigerTrail's picture

Too Late, what difference does it make Now anyhow - "Bullish" of course.

Mon, 02/27/2012 - 19:02 | 2202008 littleenglander
littleenglander's picture

I think the ECBs rules are the best rating from the 3 main agencies, so no doubt they will still be valid for LTRO.  (As long as Fitch hold out till 1 March)

I think Draghi's plan is to take as much CDS bearing Greek debt out of the market. The EU banned naked CDS, so this will prrobably soften the CDS contracts impact for EU banks.

Sure the 2 things aren't related (I was too busy looking at the other hand)


Mon, 02/27/2012 - 19:20 | 2202047 Timmay
Timmay's picture

Sounds like Germany needs a bailout from having to bailout Greece.

Mon, 02/27/2012 - 19:33 | 2202078 EuroSovietSerf
EuroSovietSerf's picture

Does this mean that the old Soviet Union bonds I hold are worthless?

Mon, 02/27/2012 - 20:38 | 2202237 unrulian
unrulian's picture

are they trillion Ruble bonds from 1937?

Mon, 02/27/2012 - 19:47 | 2202110 navy62802
navy62802's picture

Wow, S&P was really "Johnny-on-the-spot" with that call.

Mon, 02/27/2012 - 21:18 | 2202304 chindit13
chindit13's picture

If CACs can be inserted retroactively and crammed down bondholders’ gullets---making contracts unilaterally voidable, at least by one side---and this does not affect investors’ willingness to keep buying sovereign debt, then a subjective and completely self-serving ruling on whether a “default event” has occurred---thus triggering CDS payouts---might not have any effect on investors’ willingness to live with unhedged sovereign debt.  Sorry, Tyler.

Just because I am logical and fiscally prudent does not mean everyone, or even a majority is.  When I think that all hell might break loose as investors discover they have neither any rights nor any means of protection, I remind myself that these folks are playing with other people’s money, not their own.  The only risk the bond buyers have is losing their jobs.  In their private calculus, I suppose they assume the risk of losing their job is greater if they miss a bond rally and payout targets, than if they are forced to take massive “voluntary” haircuts along with everybody else.  In the former instance they are the nail that sticks out too far (they get hammered);  in the latter they are just one of a host of victims, lost in the crowd. 

Since talk of retro-CACs became commonplace, Italian 10-years have rallied 20% (three months).  The market not only did not panic, it didn't even yawn.  It applauded the loss of bondholder rights and the fact that contracts are meaningless.

None of the managers who are getting force-fed haircuts is losing his job.  That, and that alone, is the key determinant of whether the sovereign bond market suffers as a result of retro-CACs and empty promise CDSs.  Logic says it should not be this way.  Logic is worth exactly one share of

Mon, 02/27/2012 - 21:24 | 2202317 Martial
Martial's picture

December 20, 2011- Lord Moncton: "Greece will go into hard default on March 12 of next year".

Mon, 02/27/2012 - 21:40 | 2202342 Vince Clortho
Vince Clortho's picture

When is a default not a default?

Mon, 02/27/2012 - 22:10 | 2202416 satan2liberals
satan2liberals's picture

Simple: When you owe the bank ( and can't pay)  it's a default.

             When banks choose not to pay it's not a default , it's grounds for a taxpayer bailout.

Mon, 02/27/2012 - 23:06 | 2202527 Element
Element's picture

I prefer the term involuntary investments.

Mon, 02/27/2012 - 21:41 | 2202349 iraskin
iraskin's picture

Listen cocksuckers, why are you analyzing Greece and banks that hold its debt in such a granular way that completely exceeds pricing risk? The Big Question is: will this downgrade slow down LTRO short squeeze?

Mon, 02/27/2012 - 22:08 | 2202410 satan2liberals
satan2liberals's picture

"does the ECB allow defaulted bonds to be pledged as collateral within the Euro System?"


That's a no brainer, of course they do.

Mon, 02/27/2012 - 23:03 | 2202521 chindit13
chindit13's picture

From the ECB's own charter:

"The ECB, discriminating not on the basis of race, color, creed, national origin, socio-economic status, nor past indiscretions welcomes as collateral any perceived obligation of repayment, express or implied, the borrower wishes to post or even simply claim to have.  Authorization has recently been granted to accept Russian Tsarist Bonds, as the ECBs own proprietary algorithms have determined the likelihood of repayment of these obligations is at least as likely as current Greek and Portuguese sovereign obligations.  As the saying goes, the ECB will also accept collateral from the State of Denial, so long as it is on decent letterhead."

Tue, 02/28/2012 - 00:04 | 2202450 BlackholeDivestment
BlackholeDivestment's picture  

...yer kidding, someone down arrow'd Juniour Brown. What, can't make the leap from Greece to being broke down in Dallas? Lol. Forgive me...

Tue, 02/28/2012 - 02:01 | 2202862 TigerTrail
TigerTrail's picture

No Matter what ZeroHedge Reports(which is mostly to scare people and bearish news) The Market always goes up in a straight line. Balls to ZH.

Tue, 02/28/2012 - 02:04 | 2202869 TigerTrail
TigerTrail's picture

DOW 14,000 Next Month

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