when fre and fnm went into conservatorship this counted as a bankruptcy in the credit derivatives market. so anyone who insured their debts now has to pay up. since the gse's debts are now guaranteed by the government, they haven't lost much value, but this is an example of things to come.

this is why bear stearns had to be bought out. if bear stearns had been allowed to default, its debt would have been worthless, and everyone who had insured it would have gone down with bear stearns.

fre and fnm don't have that systemic risk, but it looks like some payments will still be necessary. and the gse's won't be the last companies to be bailed out. aside from the banks, the auto industry will be looking for $50 billion in loan guarantees.

there isn't much transparency in the market for credit default swaps, but it is certain that one time bomb after another is ticking. sooner or later the fed and treasury will have to paper over one mess after another. when they do, gold and silver will be the place to go, and not in the form of an etf.

http://www.ft.com/cms/s/0/ed1e14c6-7...