Wall Street Folly

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Tim Geithner's prepared remarks for his appearance today before the House Financial Services Committee

Here's the link to the pdf

Goldman cuts their 2009 S&P 500 forecast; Gensler on Swaps regulation; Wall Street exodus leads to record office space availability; Apollo may rescue Realogy

• Goldman Sachs Cuts 2009 S&P 500 Forecast, Sees ‘Near Term’ Drop
• Swaps Need Regulation After Bank Losses, Gensler Says
• Wall Street Banks Vacate Towers Pushing Empty Space to Record
• Apollo May Invest $150 Million in Realogy After Loss

Ouch: Possible $200M loss for Harbinger on Navistar CDS bet?

Another headache for Phil Falcone's Harbinger Capital.  According to Bloomberg, the hedge fund faces a possible $200 million loss on Navistar Credit Default Swaps, which Falcone described as one of the fund's "largest performance detractors" in October:

3 weeks later, 60 Minutes visits Credit Default Swaps again

Lehman Brothers cds auction is over; the bonds were priced at 8.625

Earlier in the day, the preliminary estimate for the bonds was 9.75, but the final price came in a little lower, at 8.625.  That means that sellers of cds will have to pony up 91.375 cents on the dollar, slightly more than originally expected.

Will today's Lehman CDS auction help the market move forward?

The much anticipated Lehman CDS auction has been overhanging the market, and final pricing is due by 2pm.  On a preliminary basis, the pricing of the bonds is said to be around 9.75 cents on the dollar.  So that means that those that bought credit default swaps on Lehman debt will net 90.25 cents on the dollar from the sellers.  The issue is, it's unknown who the many of the Lehman cds sellers were, and whether or not they'll be able to cough up the bucks to make good.  It'll be interesting to see who, if anyone, isn't going to be able to deliver and what shock waves might ensue once it's known who those players are.  Stay tuned. If there are limited fails in this major test of the cds market, it'll be a huge plus for the market in general. If there are major fails, look out below.
Lehman Bonds Given Initial Value of 9.75 Percent in CDS Auction - Bloomberg

60 Minutes focuses on the credit default swap market

Watch CBS Videos Online

"Wall Street's Shadow Market"

More Lehman headlines: S. Korean strategic investor to the rescue?; Greenlight's David Einhorn is a thorn in Lehman's side; WSJ HOTS column -- Decision time for Lehman: sell stock or sell out?; Lehman puts and CDS signal more stock weakness

• Lehman Is Seeking Overseas Capital
• Lehman Battles an Insurgent Investor
• Decision Time for Lehman
• Lehman Puts, Default Swaps Show Investors Bet on Further Drop

Let the buyer and seller beware: There are many ways to get screwed by CDS

All of those Bear Stearns CDS buyers must have thought they were really sitting pretty as Bear Stearns plummeted into the almost certain financial abyss.  Then The Fed and JP Morgan stepped in, and in one fell swoop saved the CDS sellers from impending doom and fucked the buyers.  That's one way to get screwed.  Then there's the risk that your counterparty fails.  There have been several articles in the last few months (especially after the Bear Stearns unraveling) on the perils of credit default swap market.  Bloomberg has another excellent one.....