Will Hutton\’s suitably apocalyptic today.
As recession deepens, there will be defaults on securitised bonds and the potential collapse of more banks outside the G7 ring-fence. Nobody knows what proportion of the $55 trillion of credit default contracts that have actually been written will be honoured and who might bear losses running into trillions of dollars.
Now I\’m not sure if I\’ve got this right, but can\’t the losses only be equal, in total, to the underlying losses? That while there may well be $55 trillion in nominal terms, most of those cancel out and so the total actual losses will be the underlying $1 or $2 trillion?
A lot of which has already been written off by the banks anyway?
On a slightly different point, about those CDS contracts. Does anyone know, would nationalisation of a bank be an "event" under them, one that would trigger a payout? Thus meaning that if, say RBOS were nationalised, then all of the contracts they\’ve written then become due?