Betrayal is a violation of trust whereas treachery is betrayal by prior intent. For example, if financial institution A were to write Greek Bond insurance contracts with investors B, C, D, etc. in case of default by the Hellenic Republic of Greece knowing that the contract would never be enforced to pay off, this would fit into the above definition of treachery. Let’s say that financial institution A issued contracts on $10 Billion worth of bonds and generated $200 Million in immediate profit, a mere 2% of face value. Financial institution A gives its executives bonuses from that $200 million in profit. The investors paid 2% insurance to guarantee their principal. The interest on the bonds would more than offset this insurance cost, a prudent investment.
Now let’s fast forward a few years and Greece needs to devalue those existing bonds by 53.5%. Now those bonds are worth $4.65 Billion, less than half of the original principal. Who should take the loss? The insurer against default or the bondholder who paid for insurance against such an event? See: http://www.cbsnews.com/8301-505245_162-57391659/greece-steps-up-pressure-in-uncertain-bond-deal/
Who decides whether the insurer must pay? The ISDA(International Swaps and Derivatives Association). If financial institution is required to pay, their balance sheet capital immediately goes down by $5.35 Billion and potentially makes them insolvent. This would be an instantaneous event. A similar event occurred in 2008 to Lehman Brothers and they are now history. Vice President Joe Biden mentioned the potential of a bank holiday at that time. On the other hand if investors B, C, D, etc. suffered losses, it would be spread among many smaller entities without adversely affecting the financial system.
Greece has $271 Billion in bonds issued to private holders. Roughly $200 Billion will be lost by someone. Then comes Italy, Spain, and Portugal. This is a multi-trillion dollar loss potential. The ISDA voted unanimously that Greek Bonds had not triggered a credit default. Who were those to vote on this?
Determinations Committee: EMEA
Meeting Date: March 1, 2012
Issue Number: 2012022401 Has a Restructuring Credit Event occurred with respect to Hellenic Republic?
Question 1. for vote: Has a Restructuring Credit Event occurred with respect to Hellenic Republic?
Vote result: No
Votes: 15 “NO” votes –
Bank of America Merrill Lynch
Barclays
Credit Suisse
Deutsche Bank AG
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
UBS
BNP Paribas
Societe Generale
Citadel Investment Group LLC
D.E. Shaw Group
BlueMountain Capital
Elliott Management Corporation
PIMCO
See: http://www.isda.org/dc/docs/EMEA_Determinations_Committee_Decision_01032012Q1.pdf
Aren’t these the same institutions that issued the insurance contracts to begin with?
Did the tornado at Henryville, Indiana do this?
Let’s see, should the insurance company honor the claim on that bus? Let’s take a vote…..
Love will overcome treachery and betrayal. Men’s hearts will be convicted of such acts and Our Heavenly Father will evoke righteous, corrective judgment. Their pain is coming soon.