Of market interventions, bailouts and unintended consequences

While the markets are celebrating with euphoria what is known as the biggest bankruptcy in the history, a succession of lies and a market manipulation and a huge con orchestrated by the managers of Fannie and Freddie, Karl Denninger points us to the unintended consequences that this event is now triggering:

Thirteen ``major'' dealers of credit-default swaps agreed ``unanimously'' that the rescue constitutes a credit event triggering payment or delivery of the companies' bonds, the International Swaps and Derivatives Association said in a memo obtained by Bloomberg News today. Market makers for the privately traded contracts will discuss how to settle them in a conference call at 11 a.m. in New York, the document said. (source: Bloomberg).

Given the trillions of USD in notional terms in the CDS markets, this will get interesting and potentially devastating for the financials institutions which insured the bonds...

[UPDATE] Mish also has posted his point of view with additional details and info here.