There's A Hole In My Bucket

Dear Darling,

What a cock up! Are you really such a fool? Can't you see there's a hole in your bucket, and no matter how hard you bail, nothing's going over the side?

The ship is sinking, my Darling, and you know it.

Watching the news over the last weeks, and every day, you, your colleagues, your political "enemies," mainstream commentators ... you've all been lying through your teeth.

Credit Crunch

I'm told its a "credit crunch." I'm told it started in America. I'm told it's caused by a wunch of Bankers losing "trust" in each other. I was even told collapsing bank stock prices were because of short selling "spivs."

"This is beginning a process of un-bunging a big problem where banks won't lend to each other for long periods," you said this morning.

All lies!

And so it went on. You had the gall to suggest that the taxpayer would receive dividends on the equity we are "purchasing." I wet myself.


Let's have a look at reality for a moment, shall we Darling?

If I were to say Credit Default Swap to you, would you even know what I am talking about? What was the rush to get this bailout announced, anyway? Was it really crashing bank stock prices?

Or was it that tomorrow sees the auction of Lehman CDSs and it was that fact which was causing bank stocks to tank?

When Fannie and Freddie's CDSs came up for auction on Monday, because they were government backed, the recovery rate was high, and so sellers of protection are only having to shell out a few percent. Still significant, but manageable, since they have until the 15th to pay up.

But Lehmans isn't government backed, is it? What happens when their CDSs come up for auction? Will the recovery rate reach 50%? Less? What exposure does the financial system have to Lehmans CDSs? You don't know, do you? No-one does!

And then, just to add insult to injury, what about the second level of abstraction that some financial players face? I'm referring to those hedge funds, insurance companies and banks who, in their absolute insanity, put these CDSs into CDOs, and leveraged them.

Maybe, with this bailout, you've done enough to cope with the Lehmans auction. If so, good for you. Sadly, though, there are other CDS tsunamis on the way ... Washington Mutual and AIG.

Darling, the ship's sinking. Your bucket ain't working. You need a new bucket.