entirely as expected, but still

[solarbird]


      Price  Change  Percent
FNM    1.19   -5.85  -83.10%
FRE    1.11   -3.99  -78.24%

More importantly, here, from Bloomberg:

Thirteen "major" dealers of credit-default swaps agreed "unanimously" that the rescue constitutes a credit event triggering payment or delivery of the companies' bonds, the International Swaps and Derivatives Association said in a memo obtained by Bloomberg News today. Market makers for the privately traded contracts will discuss how to settle them in a conference call at 11 a.m. in New York, the document said.

Now maybe we get to see what some of that financial "dark matter" is made of. Link courtesy Karl, who asks:

What does this mean? Nobody knows. There's never been an event of this size. Remember, what everyone was worried about with Bear Stearns was that a "credit event" could cause a cascade failure in the financial system. Well, now we get to find out if there is really a risk of such a thing, and who gets rammed with the costs when this all winds down.

Everyone has been thinking - well, hoping, really - that in the end, most of these things would cancel each other out and the actual amount of transaction would end up being very small. Certainly I've been hoping that, because the notational value of this market is batshit crazy omg goodbye-to-money large. It still seems inevitable that lots of this will zero out against itself, but not all, and the ten trillion dollar question is... how big is that remainder?

eta: After I went to bed, the dollar recovered its overnight losses. Neat.

Comments

[llachglin.livejournal.com]

I will never understand the stock market, which is way up on this news. It's like investors are cheering that something is being done about a really bad situation without noticing the really bad situation. Or "it's already priced in" or some such bullshit.

[solarbird]

There's usually a "YAY EVERYTHING FIXED NOW!1!!" reaction to things like this before you get reality setting in. Here's the first shoe - the meeting I mentioned before appears to show that over US$1 Trillion in credit-default swaps are triggered here. This is the start of round one.

[denelian.livejournal.com]

should we just make you go to bed more? because if when you go to bed, the dollar recovers...

oh wait. correlation does not equal causation... which sux....