us banks in big trouble?, page-32

rowingboat,

I wouldn't get too excited about 200 point plus spreads on credit default swaps for banks. In late 2008 credit default swaps on BHP got out to 500 points! And BHP didn't have any debt!

Credit default swap spreads are a good proxy for equity prices. Hedge funds wishing to short the banks can get set for $50-$100 million in a phone call and not have to mess around with ASX liquidity and stock borrowing.

The price blow out reflects that sort of activity rather than a genuine expectation of default.