Self-inflicted injury. Bankers suffer paper cut from own printer

I mean - they created the f^^&king things. Serves them right.
I know. We'll be paying for it, eventually.

from theautomaticearth.blogspot

"CDS on U.S. Banks Stubbornly High
by Nicole Hong - Wall Street Journal

The cost of insuring major U.S. banks' debt against default is still nine times as high as it was before the credit crisis, with the cost of credit default swaps for some institutions' bonds at levels normally associated with credit ratings on the edge of "junk."

Analysts and money managers blame several factors for the stubbornly elevated CDS levels—regulatory uncertainty, declining loan volumes and concerns about how much U.S. banks are exposed to Europe's sovereign debt crisis. Some said they believed the CDS market is too bearish, others that robust earnings would bring protection costs down.

Median spreads for CDS on six major U.S. banks—Morgan Stanley, Bank of America Corp., Citigroup Inc., Goldman Sachs Group, J.P. Morgan Chase & Co. and Wells Fargo & Co.—averaged 1.41 percentage points Friday, according to Markit data. This means that it costs an average of $137,000 annually to insure $10 million of debt against default for five years.

Although these spreads have tightened since they peaked at an average of 3.95 percentage points in March 2009, they are still a far cry from their levels before the credit crisis. In January 2007, average CDS spreads at these six banks were only 0.15 percentage point.

Curiously, CDS no longer correlate to credit ratings the way they did before the crisis. Average CDS-implied ratings at U.S. banks were about one notch higher than their Moody's credit ratings before the crisis, but now are three to five notches lower. These six big banks all have solidly investment-grade credit ratings between Aa3 and A3, but four have CDS-implied ratings of Baa3, just one notch above junk bonds.

Analysts and investors are divided on how much to read into this anomaly. "It doesn't mean the companies will lose access to their deposits or to funding markets," said Tony Smith, senior director at Moody's Analytics. "This is just one metric that will capture investor sentiment at the moment."
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