It's no surprise that the cost to insure against a Lehman debt default rose significantly yesterday, but below we provide a historical chart of this default risk over the last year. As shown, default risk as measured by 5-year credit default swap prices is now just above the March highs made during the Bear Stearns crisis. Back in March, Lehman's stock price was still in the $30s, while it is in the single digits now. The fact that the discount window is open to Lehman this time around is making a big difference, keeping CDS prices lower than they would have been if Lehman were in the same situation pre-Bear collapse.
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Lookes like G S is getting this baby
Posted by: dj | September 10, 2008 at 09:34 AM
The "discount window?" That is more fiat currency computer generated by the FRB and backed by the taxpayers.
Assume that the Lehman rescue is successful. It will be followed by an endless stream of other "players" that bet the bundle and lost, not only investment and commercial banks,but hedge funds, LBO specialists, automobile companies, and airlines.
Does the phrase "sending good money after bad" resonate at all? You can only "kite" so many checks before they start coming due, and a Ponzi scheme can expand only so far. The "knee knockers" are here for their money.
Posted by: George McDuffee | September 10, 2008 at 05:42 PM
Is there anyway for an average person to get the Credit Default Swaps quotes anywhere on the web for free..
Posted by: Kumar | September 11, 2008 at 01:10 PM