The Independent (in Britain) today sadly sighs that Lehman’s bankruptcy is ten times more complicated than Enron.

And how this made the impact of Lehman’s bankruptcy all the more horrendous over there.

The Protection Sellers will be paying over 91 cents (out of 1.00) for every subject Lehman bond.

Estimates are that the dollar cost paid/rec’d will be about 270 billion.

Big diff. More.

(Do you mean that persons unknown went about filling the universe with structured finance bonds as a kind of Doomsday Machine?)

In your second, I don’t know who/what “they” (third word) refers to.

If “they” are the zillion swaps LBHI guaranteed in a half zillion deals still outstanding — which now have at least technically had their Early Termination provisions triggered, then …

Does that mean the “other claims” you refer to are those of Lehman’s other creditors?

Presumably ALL of Lehman’s creditors are seething in the street outside the Bankruptcy court. The latter will now decide who gets what before whom, pretty much.

I have no idea where in that morass the issuer of a CDO that has an interest rate hedge provided by Lehman might stand. “It goes as it goes — Danaans and Trojans have it alike.”

Looking at the sytemic effect of these instruments and their prevalance. It would appear to untrained eye that they whether they did or did not anticipate trigs, their systemic effect is to insure “the system” against triggering events because they generate so much uncertainty and counterparty risk that they a large enough trig event will bring on at least the symptoms of systemic risk.

In addition they appear to be senior claims to everything else, thus triggering subordination of all other claims.

Is this right?

Here’s a withering blast from a pretty good Wall Street pundit.

Apparently the WSJ yesterday published an account of what Lehman’s books really looked like. Garbage.

Eg: Marking commercial mortgage bonds at near par (a dollar) when the average across the Street was 65 cents.

Todd Harrison at Minyanville.com notes that today, Monday October 6 — with the Dow 30 down 675 at the moment after aforementioned quasi-crash in Europe:

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we’ll receive word from the International Swaps and Derivatives Association (ISDA) regarding the settlement of credit derivative transactions in Fannie Mae and Freddie Mac.

How this protocol plays out will reverberate throughout the entire Credit Default Swap universe.

In plain English, there isn’t enough money to go around and counter-party risk has increased in kind. Whether or not that can be contained will go a long way in shaping the next leg of the tape.

The government is keenly aware of these developments.

They woefully underestimated the amount of short-term Lehman Brothers paper held in money market funds—which contributed to the panic when some funds “broke a buck”—and explains why they’ve been more careful in how they’ve since handled situations, keeping both AIG and Wachovia alive while allowing WaMu, with little short-term debt, to fail.

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