Topic: Credit Default Swaps

Fitch has downgraded Greek debt, signaling a technical default as the March 23rd deadline approaches. This financial milestone, occurring just before Greek Independence Day, is expected to trigger insurance payouts on credit default swaps held by various hedge funds.

A report by Max Keiser deconstructs the financial situation in Greece, alleging the country is enslaved by debt to the IMF and the Troika. The analysis claims Goldman Sachs used credit default swaps to hide Greek debt to facilitate entry into the Eurozone. The hosts suggest Greek national assets are being used as collateral for inescapable international loans.

The European financial situation deteriorates as Moody's threatens to downgrade French banks, which would trigger massive fund withdrawals. In Athens, strikes and violence continue as Greek bond yields reach extreme levels, effectively signaling a one-sided gamble on the country's solvency. The hosts discuss the difficulty for amateur investors to hedge against these collapses using credit default swaps.

Bank of America moved $75 trillion in derivatives from its Merrill Lynch unit to a subsidiary holding insured retail deposits. The Federal Reserve approved the move despite objections from the FDIC, which now bears the risk if the derivatives fail. The hosts describe this as a "scam" to ensure the government guarantees the bank's risky bets on European debt.

Leaked emails suggest that the New York Federal Reserve, under Timothy Geithner, pressured AIG to keep quiet about paying banks 100 cents on the dollar during the 2008 bailout. The payments primarily benefited firms like Goldman Sachs and Societe Generale using public funds. The hosts argue that these leaks are intended to force Geithner out of the Treasury Department due to his perceived weakness and incompetence.

The discussion shifts to the $170 million AIG bonus scandal, which is characterized as a distraction from billions in taxpayer funds flowing through AIG to counterparties like Goldman Sachs. Former New York Governor Elliot Spitzer is cited for his analysis of how AIG functioned as an insurance conduit for bad money deals. Questions are raised regarding why the U.S. government only owns 80% of the company rather than full nationalization.

A discussion with international money managers reveals a consensus that the conflict in Afghanistan is primarily driven by the drug trade. In the financial sector, insurance companies are reportedly refusing to pay out on credit default swaps, leading to hundreds of massive lawsuits. The global financial system is described as being in a state of collapse that cannot be fixed by printing more money.

The total value of credit default swaps and toxic assets is estimated to be between 30 trillion and one quadrillion dollars, a scale that prevents Treasury Secretary Timothy Geithner from being transparent about bank solvency. The situation is compared to Japan's "lost decade," where the government failed to deal with toxic assets for 20 years.

John C. Dvorak references the book "Understanding Swaps" to highlight the explosive growth of the derivatives market since the 1970s. The hosts praise Harry Markopolos, the whistleblower who repeatedly warned the SEC about Bernie Madoff's Ponzi scheme. They discuss the staggering scale of outstanding swaps, estimated by some to reach 1.4 quadrillion dollars.

The placement of Fannie Mae and Freddie Mac into conservatorship is identified as a "credit event" that could trigger the unwinding of trillions of dollars in derivative contracts. The cost of insuring debt through Lehman Brothers has skyrocketed to nearly a million dollars for every ten million insured. The complexity of these poorly documented deals poses a systemic risk to the global economy.

A small bank in Kansas has failed, signaling continued instability in the financial system driven by $500 trillion in uncovered derivatives and credit default swaps. Amidst these economic concerns, the use of "burner" phones is recommended for privacy. There is also skepticism regarding the upcoming Google Android phone and whether it will track users' movements for government or commercial purposes.