Correct.

CDS are basically insurance contracts, that you can speculate on, at insane leverage.
The banks loved them, as they were in the OTC market, thus they could charge huge fees for facilitating trades to customers in the market.

jog on
duc

You buy a CDO, which is a package of Mortages.
You buy a CDS because Wachovia has a bunch of CDO’s that are going to push them into default on loans you made to them.

Doesn’t change the fact that this is a huge amount and bad! Who knows what else is lurking out there?

Wachovia stinks, too.

As far as I know the LEH CDS were settled.

The CDO’s are another debt asset class [that have their own attached CDS contracts]
CDO’s are linked to auto loans etc.

The MBS securities, mortgages, which had CDS written against them, settled.

This is the next deleveraging debt asset class.

jog on
duc