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Wallstreet bets on debts that doesn't exist



February 28, 2011 – Comments (0)


Fresh from Wall Street's alchemy labs: Credit derivatives tied to General Motors Co. (NYSE: GM - News) debt. The rub is, no such debt exists.

Banks and hedge funds are trading credit-default swaps, which make payments to holders of General Motors bonds in the event of a default. But GM canceled $40 billion of debt in bankruptcy and has pledged to cut its remaining $4.6 billion bank loan to the bone this year.

That is merely a technicality for the banks and hedge funds that have been actively trading the CDS.


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