WELL NOW WE KNOW
24th December 2008
On 17 March 2008, while the carers were seeing to Carol, I sat down at my computer and logged-on to Robert Peston’s blog. Peston is the distinguised financial editor of the BBC who would later become notorious for almost single handedly wiping out the British Banking Industry by publishing confidential government information revealing that the situation was much more serious than anyone realised.
Google it if you don’t believe me, but this is what the record shows;
At 09:41 AM on 17 Mar 2008, Anthony Samuelson wrote:
What seems to escape notice is that the Bear Stearns of this world, and the hedge funds, don’t just do sub-prime and AAA mortgages. They also engage in the derivatives and futures markets where there is always a counterparty.
Supposing you get it right and are making a pile of money but the counterparty goes broke. What happens then?
Addendum (posted 26 December 2008)
Seen on Bloomberg: Lehman Roils Muni Swaps as Collapse Forces Payments
Six years after embarking on an effort to lower borrowing costs using derivatives, New York is watching those savings evaporate.
The state says it paid bankrupt Lehman Brothers Holdings Inc. and other Wall Street banks at least $75.9 million since March to end interest-rate swap contracts that were supposed to lock in below-market rates. That money and the costs of issuing new debt to replace bonds linked to swaps gone awry are eroding the $207 million in savings New York budget officials say the derivatives produced since 2002.
New York isn’t alone. Lehman’s bankruptcy filing on Sept. 15 triggered the termination of similar contracts across the country, forcing state and local governments and other borrowers in the $2.67 trillion municipal-debt market to buy out the agreements. They suddenly find themselves making unexpected payments at a time when their revenue is already under pressure from the worst recession since World War II.
There is more, for which go to Bloomberg, here