The Vampire crimewave continues. A NEW derivative CREDIT RECOVERY SWAPS

[Joanne98]

Nov. 25 (Bloomberg) -- Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co., which helped turn bets on company defaults into a $47 trillion market, are among banks offering wagers on the amount investors may recover from bonds after borrowers go bankrupt.

Credit-recovery swaps are trading on the debt of about 70 companies, including automaker General Motors Corp. and bond- insurer MBIA Inc. That’s up from 40 during the summer, according to Mikhail Foux, a strategist at Citigroup in New York.

The contracts, barely traded in 2006, are now worth about $10 billion as more companies fail to repay debts, Foux said. Also known as recovery locks, the agreements are bought as insurance by sellers of credit-default swaps, such as banks, hedge funds and insurers.

“The market definitely has potential to grow,” Foux said. “As we see more defaults -- and there’s no doubt we’re going to see more defaults -- you’re going to see more recovery swaps trading.”

Goldman Sachs and JPMorgan officials declined to discuss their role in the market.

Continued>>>
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_L5pzskD4rU&refer=home

:rant:

I hope this doesn't have anything to do with GM not getting a loan.

:argh:

[Turbineguy]

1. Our "friends" keep

cooking up ways to loot our retirement plans.

[Joanne98]

3. We need to lynch them all!

[Joanne98]

2. Citi now doing credit RECOVERY swaps

by bushbuster

Tue Nov 25, 2008 at 02:59:44 PM PST

Not content to just fritter away OUR $20 billion on stadium naming rights or equally outrageous billion dollar executive bonuses, Citigroup is now plunging headfirst into the newly "emerging" market of credit RECOVERY swaps. Bloomberg News reports that Citigroup, one of the primary peddlers of the now infamous credit default swaps, is one of several banks selling "wagers on the amount investors may recover from bonds after borrowers go bankrupt."

How obscene is this?

"The market definitely has potential to grow," Foux (a Citigroup strategist) said. "As we see more defaults -- and there’s no doubt we’re going to see more defaults -- you’re going to see more recovery swaps trading."

Once again, this is stuff that's all done in secret -- they're not traded on any exchange, nor are they subject to any of those pesky rules, regulations, or reserve requirements, etc.

"There has not yet been member demand for us to track recovery swaps"

-- this from a spokeswoman for the International Swaps and Derivatives Association.

bushbuster's diary :: ::
Devilstower has an excellent article that explains credit default swaps (CDS) in all their Ponzi-scheming glory. Do you think NOW we can get Congress to get off its butt and stop with the Strongly Worded Letters™ and finally start investigating these guys? I don't know, maybe for misappropriation of funds, or for what sure is beginning to look like major misrepresentation of their true financial state (what used to be known as fraud). How is it that we're paying for yet another gambling adventure, where the only guaranteed winners are the house (ie, Citigroup and the other vulture banks) and the only guaranteed losers are we, the taxpayers?

http://www.dailykos.com/storyonly/2008/11/25/165630/68/785/666361

[Jackpine Radical]

4. For us small fry, it's like having to stake someone else at Satanic 3 card Monte.

There are only 3 rules.
The first is that you can't win.
The second is that you can't break even, either.
And the third is that you can't get out of the game.

[Cronopio]

The entire casino is burning down and they still can't leave the table.

This is what American capitalism has bred - pathological profit addiction.

Next they'll be betting on whether people will recover from the credit recovery swaps. Second derivative, third derivative, and on and on. They just never learn.

[Joanne98]

5. Remember that rumor that came out right before the DNC convention?

The one about how Pelosi was going to invest 50,000 dollars in Boone Pickens hedge fund BP capital? Well. She NEVER did answer that question. So we have to ask WHY can't GM get a loan? Well. It seems that GS, JPM, MS and C are selling these CRS's and the people who buy them get paid IF the company goes BANKRUPT! Guess who's on the CRS list.

That's right GM! I'd love to see Madam Speaker's portfolio right about now!