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Hamilton on CDS Trade: "A fool and his money ..."
Calculated Risk — I was going to post something on this CDS trade, but Professor Hamilton did a much better job than I could: How to lose on a sure-fire bet ...

The WonkLine: June 12, 2009
Wonk Room — ... Bloomberg reports that “U.S. taxpayers have reaped a 7.5 percent return on the $45 billion used to rescue Citigroup Inc., more than three times as much as if the money had been invested in the Standard & Poor’s 500 Index.” According to a Federal Reserve report released yesterday “Americans saw $1.3 trillion of wealth vaporize in the first quarter of 2009, as the stock market and home values continued to decline.” Via Econbrowser, we have the tale of Amherst bank in Austin, TX, beating the Wall Street banks at ...

An object lesson on credit swaps
Fausta's Blog — ... all the insurance premiums it had been paid by JP Morgan and others, all of whom were speculating on an imminent default. Clever! J.P. Morgan Chase & Co., Royal Bank of Scotland Group PLC and Bank of America Corp. thought the bonds would default, but got outwitted by Amherst. Good for Amherst. As forJ.P. Morgan Chase & Co., Royal Bank of Scotland Group PLC and Bank of America Corp., play me the world’s smallest violin. Or, as Econobrowser put it, For my money, the first rule we need would be ...

Apparently there’s a banker born every minute
dustbury.com — James Hamilton happens on a Wall Street Journal story about credit default swaps, and is positively gleeful as he relays it: [T]he WSJ recounts [behind paywall] the tale of a security based on $29 million (par) worth of subprime loans in California, half of which were already delinquent or in default. Betting that the loans weren’t worth $29 million sounds like easy money, and the smart guys were willing to pay 80 to 90 cents for each dollar of CDS insurance. It appears from the WSJ account as if ...