They were betting on failure for profit, as always… but!

The banks … paid as much as 80 to 90 cents for every dollar of insurance, the going rate last fall according to dealer quotes, expecting to receive a dollar back when the securities became worthless …

At one point, at least $130 million of bets had been made on the performance of around $27 million in securities …

In late April, traders at some banks were shocked to find out from monthly remittance reports that the bonds they had bet against had been paid off in full. Normally an investor can’t pay off loans like that but if the amount of outstanding loans falls to less than 10% of the original pool, the servicer … can buy them and make bondholders whole.

So that $130 million they bet on some poor assholes losing their remaining 10% of the MBS loan pool this whole shit-fit was based on… poof! Gone.

And thus we see why credit default swaps should be regulated… if not illegal. In the past, this shit payed out huge, in fact it’s what ruined the economy after Bear Stearns and Lehman failed… AIG had to pay out $billions in CDS payouts after Bear Stearns failed (to JPM, BofA, and others who just lost their asses in the article linked above)… they raped us for billions but are no doubt pissed off that they lost $130 million on this deal (that they probably didn’t actually have any real interest in, were just betting money on them failing).

Tags: bitching, failout, yes this is really how I amuse myself

This entry was posted on Thursday, June 11th, 2009 at 18:08.