Banks used credit derivatives to transfer a record $427 billion of credit risk from their balance sheets to other counterparties in 2004, up from $260 billion a year earlier, Fitch said.

is code for ‘they took the losses off the books to make the bank accounts look better. Easy to do, when CDS’s are not regulated.

And Paulson is proud to preside over this scale of economic venalty, eh?
Wow.

On September 4, 1985, Murdoch became a naturalized citizen in order to satisfy the legal requirement that only US citizens were permitted to own American television stations.

It worked so well for him in the USA that he has become a citizen in Turkey so he repeat it.

Recently, Murdoch has bought out the Turkish TV channel, TGRT, which had been previously confiscated by the Turkish Board of Banking Regulations, TMSF. Newspapers report that Murdoch has bought TGRT in a partnership with the Turkish recording mogul Ahmet Ertegün, and Murdoch is alleged to have acquired Turkish citizenship in order to overcome the current prohibition against capital sales to foreigners.

Credit Derivatives Led by Too Few Banks, Fitch Says (Update2)
Nov. 18 (Bloomberg) — The $12.4 trillion market for credit derivatives is dominated by too few banks, making it vulnerable to a crisis if one of them fails to pay on contracts that insure creditors from companies defaulting, Fitch Ratings said.

JPMorgan Chase & Co., Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley are the most frequent traders in a market where the top 10 firms account for more than two-thirds of the debt-insurance contracts bought and sold, Fitch said in its Global Derivatives Survey for 2004 published today.

Investors use so-called credit-default swaps to insure debt payments or bet on credit quality. Demand surged this week for swaps protecting payments by General Motors Corp. on concern the world’s largest automaker may use up most of its $19.2 billion in cash reserves in the event of a strike at Delphi Corp., its largest auto-parts supplier. Delphi defaulted on about $2 billion of bonds when it filed for bankruptcy on Oct. 8.

“Risk concentration remains high,” said Ian Linnell at Fitch in London. “In the event that there was a major default, for instance General Motors, and then one of the major dealers also defaulted, the market would be in major trouble.”

Credit-default swaps are the fastest growing part of the $270 trillion derivatives market, based on the so-called notional value of the debts that underlie the contracts, according to the Bank for International Settlements. The default swaps market worldwide jumped 60 percent to $10.2 trillion in the first half of 2005, the BIS said in a report yesterday.

Fed

The growth is so rapid that the New York Federal Reserve in September summoned 14 of the biggest banks in the market, for failing to keep pace in processing the transactions, causing a backlog that threatened the stability of the banking system.

“The probability of a major dealer defaulting is extremely low, but as the market continues to grow, the issue is being ramped up all the time,” Linnell said.

In a credit-default swap, the buyer pays an annual premium to guard against a borrower’s failing to pay its debts. In the event of default, the buyer gets paid the full amount insured, and hands over defaulted loans or bonds to the swap seller. Swap prices typically decline when creditworthiness improves, and rise when it worsens.

A derivative is a financial obligation whose value is derived from such underlying assets as debt and equity, commodities and currencies.

GM was among the five companies most frequently included in credit-derivatives contracts in 2004, along with Ford Motor Co., France Telecom SA, DaimlerChrysler AG and Deutsche Telekom AG, Fitch said. Investors bought more contracts protecting payments from Korea, Italy and Russia than any other governments.

GM

Traders of GM credit-default swaps last week demanded upfront payments in addition to annual premiums to protect debt payments by the Detroit-based company. By doing so, the market relegated GM to the same status that Delphi and Delta Air Lines Inc. had just before those companies defaulted.

The annual cost of insuring $10 million of GM debt for five years using default swaps rose to a record of $2.35 million upfront plus $500,000 a year, compared with an annual premium of about $1 million early last week, according to Deutsche Bank prices. The debt-insurance contracts changed hands at about $260,000 at the start of this year, according to Bloomberg data.

Newcomers

Several money managers traded credit derivatives for the first time this year, reducing the dominance of banks in the market, said Marcus Schueler, Deutsche Bank’s head of integrated credit derivatives marketing in London, and Richard Stuart- Reckling, product manager for credit derivatives in Europe at Morgan Stanley, at a conference in London today.

“The investor base is far deeper and broader than it ever was,” said Stuart-Reckling.

Pacific Investment Management Co., manager of the world’s largest bond fund, in April and May sold “several billion dollars” of insurance against defaults on bonds issued by GM and Ford, Mark Kiesel, an executive vice president who runs Pimco’s investment-grade bond trading, said July 27. The strategy was new to Pimco, which had never used credit-default swaps to take a “significant” position in corporate bonds, Kiesel said at the time.

“This year has seen huge strides in the number of investors involved” in credit derivatives, said Daniel Berman, head of JPMorgan’s credit product management team in London, at the same conference today.

Fitch’s survey of 120 banks and financial institutions showed that banks are typically net buyers of debt insurance because they can use default swaps to reduce the risk of corporate loans.

Banks used credit derivatives to transfer a record $427 billion of credit risk from their balance sheets to other counterparties in 2004, up from $260 billion a year earlier, Fitch said.

To contact the reporter on this story: Hamish Risk in London hrisk@bloomberg.net .

Last Updated: November 18, 2005 10:07 EST
http://www.bloomberg.com/apps/…..world_news

The UAW knows well who is trying to break them. It’s not the Big 2.5, it’s the plantation caucus.

More specifically, it’s the Heritage Foundation, at whose behest Sanger write his bullshit.

Like I say, in comparison to its competition in other dead tree papers, the Times is still the leading light. Just no where near as bright as it once was but still brighter than it’s competition.