This weekend only, when you donate $90 or $8/month, you can snag our cozy new Marketplace zip–up hoodie. Don’t wait –– this offer ends Sunday at midnight.
Coming up on a credit default deadline
Share Now on:
TEXT OF STORY
Renita Jablonski: Billions of dollars could change hands today as a result of the Lehman Brothers bankruptcy a month ago. It’s the deadline for sellers of so-called credit default swaps to settle up. Analysts say some of those sellers could have a hard time coming up with the cash. Marketplace’s Amy Scott explains.
Amy Scott: Let’s say that back when Lehman Brothers was still Lehman Brothers, I bought some of its bonds. I may also have bought some insurance on those bonds, so that if anything went wrong with Lehman, I’d get my money back.
That insurance is called a credit default swap. And as we know, something did go wrong. Today is the day that whoever sold insurance on Lehman Brothers has to pay up. Estimates of the total price tag range from $6 billion to hundreds of billions.
Puneet Sharma follows the credit markets at Barclays Capital in London. He says given the losses many hedge funds and banks have already suffered, some may have trouble raising the money.
Puneet Sharma: We’ve seen unprecedented moves in the market across asset classes, and I think this could just be the straw which breaks the camel’s back.
Trouble is, it’s hard to know just who the camels might be. The credit default swap market is largely unregulated. So no one really knows who owes what to whom and how much.
In New York, I’m Amy Scott for Marketplace.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.