Jim Sinclair: The Impending Undeclared Default Of 5 Major US Banks

[ancona]

As l,ong as CDS payments do not come out of my wallet in the form of a .Gov bailout, fuck 'em and feed 'em fish heads. If they try to make these fucktards whole on my dime, that's a whole other story. If the "banks" declare some sort of "force majeure" we coul;d all see a fantastic rise in our taxes when .Gov waddles in and tries to cover these bets.

[PMBug]

So it looks like today is the big day...

Greece’s day of reckoning with bondholders dawns with economists from Barclays Capital to Deutsche Bank AG concerned that the world’s largest debt restructuring will provoke aftershocks.

Eight months of negotiations reach a head with today’s deadline for private creditors to accept a bond swap aimed at writing off 106 billion euros ($140 billion) of Greek debt. The government vows to bind holdouts to the deal should participation fall short of its target.
...
Greece needs to complete the swap to qualify for a 130 billion-euro bailout by helping drive its debt closer toward a target of 120.5 percent of gross domestic product by 2020, from 160 percent last year. Greece needs the cash to meet a March 20 bond redemption of 14.5 billion euros and dodge a default that would jeopardize the euro’s existence.

The debt swap is “just another milestone on the long road to stabilize the euro,” said Thomas Mayer, chief economist at Deutsche Bank in London. “What we’re doing here is root canal work on the architecture of European Monetary Union.”

The goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent. Investors with 58 percent of the Greek securities eligible for the program had indicated participation by 5:00 p.m. in London yesterday.
...
The government has set a 75 percent participation rate as the threshold for proceeding with the transaction, in which bondholders will receive new Greek government bonds and notes from the European Financial Stability Facility. Goldman Sachs Group Inc. analysts wrote on Feb. 28 that a voluntary participation rate meeting that target might allow Greece to proceed without making losses involuntary by enforcing so-called collective action clauses.
...
Compelling holdouts to take part will likely trigger payouts on those contracts, analysts said. A final decision would be up to the determination committee of the International Swaps and Derivatives Association, a panel of traders and investors who rule on whether swap holders can collect by handing over the defaulted debt in return for payment.

“I do fully expect to be part of the collective action clause,” Patrick Armstrong, managing partner at Armstrong Investment Managers in London, said yesterday in a Bloomberg Television interview.

“There’s a potential risk for the banking sector writ large across Europe and further abroad” from the clauses, as underwriters of the insurance have to pay out and seek funds to do so, said Erik Britton, a director of London-based Fathom Financial Consulting.

Activating the clauses also sets precedent, allowing countries such as Portugal to mimic the initiative and providing another reason to steer clear of European debt, said David Kotok, who helps manage about $2 billion as chairman and chief investment officer of Cumberland Advisers Inc. in Sarasota, Florida.

“The actual use of a CAC would be a game changer beyond Greece’s borders,” he said. “It says ‘we can retroactively rewrite a contractual agreement.’ It’s one thing to threaten or cajole, but it’s another thing to do it,” Kotok said.
...

http://www.bloomberg.com/news/2012-0...ro-credit.html

[KMS]

I woke up today kind of feeling like a kid at Christmas.

[DCFusor]

It won't be over, there will be the usual delay and baloney. So I'm not feeling like a kid at Christmas just now, because I don't believe the present is going to be under the tree.

[PMBug]

ZH reports:

http://www.zerohedge.com/news/greek-...ediate-80-loss

[PMBug]

Greece Issues Statement On PSI, Says €172 Billion Of Bonds Tendered In Swap, Will Enact CACs, ISDA To Meet At 1pm To Find If CDS Trigger

[PMBug]

Yesterday's activation of the collective action clause (CAC) on Greece's domestic law bond swap means that the exchange will likely be deemed a credit event by the International Swaps and Derivatives Association (ISDA) today.
...
If, as expected, ISDA deems the swap a credit event, questions have been raised as to how the CDS auction process will work, given that the bonds on which the CDS were written - the old bonds - will no longer exist. If the CDS payout is based on the new bonds - worth 70% less than those they replace - there are concerns over the viability of the sovereign CDS market.

ISDA has come under sustained criticism over potential conflicts of interest in its determinations committee (largely made up of the banks that will be facing payouts if the CDS are triggered), and earlier this month determined that the Greek private-sector involvement (PSI) process did not constitute a credit event as it is "voluntary". But the activation of the CAC changes all that.
...

http://www.euromoney.com/Article/299...DS-payout.html

[dereksatkinson]

Who wins and who loses if the CDS' are triggered?

[PMBug]

CDS pay out = banks lose money, CDS market remains intact

CDS do not pay out = banks retain money, CDS markets implode

Looks to me like banks have a choice to accept immediate pain for long term stability or take short term immunity and structural disaster.

[dereksatkinson]

CDS pay out = banks lose money, CDS market remains intact

CDS do not pay out = banks retain money, CDS markets implode

Looks to me like banks have a choice to accept immediate pain for long term stability or take short term immunity and structural disaster.

Well.. if the CDS does not pay out, it means that those who were using CDS as a hedge (which really wasn't that many people) end up getting stuck in a situation where their hedges are worthless. That means they will have to sell the underlying security to reduce their exposure instead of relying on OTC derivatives to hedge. That means HIGHER interest rates.

The CDS market will HAVE to implode at some point.. Why NOT now?

[dereksatkinson]

haha

2 minutes later.. It's a credit event

[rblong2us]

reckon on CDS agreements being voided, i dont see any alternative .....

theyve already demonstrated that contract law only works when it suits them

there will be new ways to paper over the borrowing risks, the main one being unlimited printing and 'recapitalising' the TBTF's.

So Greece is in default ........ and ?

[swissaustrian]

Here you can see who's in trouble now (hint: the squid) and who isn't (hint: the one's who invented CDS's) :






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