New Financial Crisis

yankblue said:
The US is the most socialist country in the world when it comes to bailing out the banks. It's when those pesky workers start wanting healthcare and a decent wage we go full Capitalism
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The Rich get ever richer, because they espouse Capitalism on the way up, Socialism on the way down!

Hilarious to hear VCs calling for a bailout of their billions in Tech Start Ups!

All the reward, none of the risk!

Bigwig Wall Street type said yesterday, “We have over 300 regional banks in the US, who needs that many banks?”

Look for the multinationals to suck up a few of these for pennies on the dollar! Don’t be surprised if Buffett’s Berkshire grabs a handful, usually of Preferreds, to make the Boogeyman disappear!!
 
Can some one explain like I am five as to what are credit default swaps and why are credit Suisse ones so much more expensive than the rest of the market?

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mindmyp's_n_q's said:
Can some one explain like I am five as to what are credit default swaps and why are credit Suisse ones so much more expensive than the rest of the market?

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Other posters might be able to offer a more technical answer but I know a bit about this stuff so I’ll give it a stab.

Think of a CDS as basically like buying an insurance policy. The insurance you’re buying is a protection against the risk of the person or firm who owes you money defaulting.

So if I lend you £100 and you’re paying me back £1 a month, there’s a risk that at some point you might not be able to pay me back and you default on the payment, maybe you lose your job. I can transfer the risk of that happening to somebody else. Maybe I pay Bob 10p a month and we agree that in return if you default on your £1 payments then Bob has to reimburse me for the remaining value of the loan. It’s an oversimplification but that’s the crux of the theory behind it.

Credit Suisse CDS prices have shot through the roof because people think the risk of them defaulting has increased so the people offering that insurance want a higher price for bearing the risk.
 
SkyBlueFlux said:
Other posters might be able to offer a more technical answer but I know a bit about this stuff so I’ll give it a stab.

Think of a CDS as basically like buying an insurance policy. The insurance you’re buying is a protection against the risk of the person or firm who owes you money defaulting.

So if I lend you £100 and you’re paying me back £1 a month, there’s a risk that at some point you might not be able to pay me back and you default on the payment, maybe you lose your job. I can transfer the risk of that happening to somebody else. Maybe I pay Bob 10p a month and we agree that in return if you default on your £1 payments then Bob has to reimburse me for the remaining value of the loan. It’s an oversimplification but that’s the crux of the theory behind it.

Credit Suisse CDS prices have shot through the roof because people think the risk of them defaulting has increased so the people offering that insurance want a higher price for bearing the risk.
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They will also quite possibly have various covenants in some of their peer loans that state if the share price drops below x or CDS trades at y etc then the loan becomes payable - this creates extra pressure on cash flow. Anyway good to see central bank has stepped in decisively to underwrite their liquidity and try to calm immediate fears. I wish CS well - they were one of the banks to not need a bail out during the financial crisis.
 
metalblue said:
They will also quite possibly have various covenants in some of their peer loans that state if the share price drops below x or CDS trades at y etc then the loan becomes payable - this creates extra pressure on cash flow. Anyway good to see central bank has stepped in decisively to underwrite their liquidity and try to calm immediate fears. I wish CS well - they were one of the banks to not need a bail out during the financial crisis.
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Due to the recent F ups with the Greensill loss and other scandals. CS set their liquidity threshold a lot higher than other banks, but even with that. When every Tom, Dick and Harry gets spooked by some American YouTubers who do not even know where Switzerland is on the map. How ever much money you have in assets cannot stop a run on the bank. The SNB can see the balance sheet and can see that the Swiss business alone is worth 15Bil even though the whole bank can be currently bought for 6 bill. Something underhand is happening.
 
Gaz in Zurich said:
Due to the recent F ups with the Greensill loss and other scandals. CS set their liquidity threshold a lot higher than other banks, but even with that. When every Tom, Dick and Harry gets spooked by some American YouTubers who do not even know where Switzerland is on the map. How ever much money you have in assets cannot stop a run on the bank. The SNB can see the balance sheet and can see that the Swiss business alone is worth 15Bil even though the whole bank can be currently bought for 6 bill. Something underhand is happening.
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Credit Suisse has been involved in all those scandals we know about; perhaps we are in the dark on many more.
 
CS was doing poorly before this latest issue. Bank’s problems appear more chronic than acute.
 
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