The Wall Street Journal has a good look at how European banks have been busy writing hundreds of billions of dollars worth of credit-default swaps on PIIIGS sovereign debt:

The numbers show European banks have sold a total of €178 billion ($238 billion) worth of insurance policies, in the form of financial derivatives known as credit-default swaps, on bonds issued by the financially struggling Greek, Irish, Italian, Portuguese and Spanish governments. If those bonds default, as some investors fear they might, banks could be on the hook for making large payments to the holders of the swaps.

The banks have at least partly insulated themselves from such potential losses by buying large quantities—roughly €169 billion worth—of credit-default swaps tied to the same bonds, apparently in large part from other European banks, according to European Banking Authority data.

Why does this matter?

The diverse array of banks in the sovereign CDS market means that risks can spread more quickly through the financial system. It also means it is harder to predict how losses would ricochet among institutions and countries, analysts say.

— Not that anyone believed James Murdoch when he said he didn’t know about the extent of the hacking crimes at his News of the World. His own attorneys testified against him, after all. But there’s really not much defense left now. The New York Times:

Rupert Murdoch’s son James received and responded to e-mail messages in 2008 that referred to “a nightmare scenario” of legal repercussions from widespread phone hacking at the tabloid The News of the World, a chain of e-mail messages and replies released Tuesday by a British parliamentary panel shows…

The e-mail chain of messages backs up the accounts of two of James Murdoch’s former senior executives, an in-house lawyer and an editor, who said they had told him of evidence that illegally intercepting voice mail messages to gather news and gossip went beyond a single “rogue reporter.”

If you thought Murdochs would finally wave the white flag on James, you underestimated them: He claims he didn’t read the full email and never knew about the evidence.

The Guardian’s David Leigh runs down Murdoch Jr.’s history of implausible denials.

— This NYT story on concerns that fracking and its byproduct disposal processes are causing earthquakes in Youngstown, Ohio, ran two days before this Bloomberg story on the same angle.

Bloomberg’s reporting is good, but as we see so often there, it’s undermined by the writing and editing. The Times’s reads much better:

Nine quakes in eight months in a seismically inactive area is unusual. But Ohio seismologists found another surprise when they plotted the quakes’ epicenters: most coincided with the location of a 9,000-foot well in an industrial lot along the Mahoning River, just down the hill from Mr. Moritz’s neighborhood and two miles from downtown Youngstown.

At the well, a local company has been disposing of brine and other liquids from natural gas wells across the border in Pennsylvania — millions of gallons of waste from the process called hydraulic fracturing that is used to unlock the gas from shale rock.

The location and timing of the quakes led to suspicions that the disposal well was responsible for Youngstown’s seismic awakening. As the wastewater was injected into the well under pressure, the thinking went, some of it might have migrated into deeper rock formations, unclamping ancient faults and allowing the rock to slip.


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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.