Wallstreet bets on debts that doesn't exist
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.