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Once you really start digging into what is going on amongst all those really smart people in High Finance, all those Harvard Educated Types, you start to realize what a bunch of clowns we have running the show. Zero Hedge wonders if the Federal Reserve is buying Greek Bonds.

We hope that some enterprising congressman will find the courage to ask Bernanke on the record tomorrow whether the Fed has at any time in both the far and recent past, purchased Greek Government Bonds in order to artificially inflate their prices. Because if the Fed has the ability to do something, it usually does, especially if it means extending the bankrupt global status quo by at least one more day. And even if the Fed has not bought any GGBs at yields of 6.8%, will it do so when yields hit 8%, or 10%, or when bondholders finally start dumping GGB in industrial amounts and the only available buyer becomes Mr. Ben "Endless Reserve Currency Pockets" Bernanke himself? And with Goldman one of the biggest sellers of Greek CDS (forget that AIG BS, the Goldman boys now are directly taking on lack of novation risk), how long before the MTM for Goldman quickly works out against them and those hotline into Bernanke’s office start flashing. Oh but don’t worry, at that point the Federal Reserve will join the EU in blaming all those other pesky CDS speculators (Goldman, of course, excluded), whom it was the Fed’s patriotic duty to defend against. And, after all, with only about 200 people understanding the mechanics of every lie involving CDS, the opportunity cost for yet more acts of treason are ever so low. Is The Federal Reserve Buying Greek Bonds? | zero hedge

And I wonder why they might be doing so. Could it be that the Federal Reserve is covering up another huge AIG bad decision? Well maybe so.

Here is a translation from the German equivalent of the New York Times that declares AIG as the primary seller of insurance against a Greek Default provided by EuroSavant.

Greek banks as insurers
On the other hand, whoever expected Greece’s rescue by Europartner countries would have had to position himself on the CDS market as an insurer, that is, as a seller of payment protection. The take in premiums from insurance protection sold provides increased revenue. But it’s on the seller-side that the weak points of the CDS market become evident. It’s still unclear who has sold insurance protection for Greece. In one study analysts from the major French bank BNP Paribas referred to market-rumors that Greek banks had insured a large sum by CDS. If this is correct, then the payment protection they have provided is worth nothing. Greek banks hold State debt of over 40 billion euros. This corresponds roughly to the entire amount of equity in the Greek credit market. A bankruptcy of the State would lead to a collapse of the banking system.

London investment bankers name AIG as a further CDS-seller. That company had to be nationalized during the financial crisis due to its having written insolvency insurance on American mortgages. This debt-load would have led to the collapse of the world’s biggest insurer. Prior to the financial crisis AIG is said to have widely held State credit-risk. If yet-larger insurance positions on Greece exist, then the American government would have a strong interest in preventing that country’s insolvency.
Even if these are mere rumors about the Greek banks and AIG, this example makes clear the weakness of CDS markets. This protection is sold by banks or insurers who themselves have access only to limited capital resources. They have as a rule clearly lesser credit-worthiness than the states for which they are selling insolvency protection. Insurance by CDS could turn out to be just a bubble.

Wow these guys at AIG sure have a knack for writing insurance they cannot cover. Sort of like the politicians whose mouths write checks our labor can never cover!

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