Gillian Tett of the Financial Times shows why banks hedging their European exposure with credit-default swaps aren’t necessarily actually hedged.

She notes that Deutsche Bank says it reduced its net exposure to Italian sovereign debt by 88 percent in part by buying CDS, but that:

These days, it is becoming less clear whether those sovereign CDS contracts really offer effective “insurance” against default. And that in turn raises a more unnerving question: if the exposures of the large European banks were measured in gross, not net, terms, just how much more vulnerable might they be to sovereign shocks? Or, to put it another way, could the problems now hanging over eurozone banks and bond markets be about to get worse, due to the state of the sovereign CDS sector?

If there’s not a technical default, like the one Europe has deliberately engineered to avoid with Greece so far, you can’t get paid on your insurance and their exposure is much higher than the net levels they’re reporting.

But the longer that the wrangle about Greece continues, the harder it will be for banks to argue that sovereign CDS is a good hedge for their counterparty or credit risk. If so, it is a fair bet that banks such as Deutsche (among others) will redouble efforts actually to sell those eurozone bonds - or demand collateral from sovereign entities for derivatives trades. Indeed, behind the scenes, these efforts are already quietly starting. It is not a comforting thought; least of all when a mood of panic is afoot in Europe’s debt markets.

Crain’s Chicago Business’s James Ylisela Jr. has a tough investigation into how political chicanery needlessly cost the state half a billion dollars. I like how the lede calls it like it is:

Illinois House Speaker Michael Madigan cost taxpayers nearly half-a-billion dollars by blocking repeated efforts to restructure McCormick Place bonds and finance a much-needed second hotel at the convention center, a Crain’s investigation finds.

Between 2005 and 2010, Mr. Madigan stopped five refinancing bills, ignoring declining interest rates that would have saved hundreds of millions. At the time, he never explained why, but his reasons seem petty and political: McCormick Place CEO Juan Ochoa, an appointee of then-Gov. Rod Blagojevich, had fired a Madigan ally at the convention center, and lawmakers from both parties say the speaker wanted retribution…

But politics may not have been Mr. Madigan’s only motivation. By holding up refinancing, the speaker also denied McCormick Place the money to build a new hotel. That bought time for clout-heavy developers Gerald Fogelson and Cleveland-based Forest City Enterprises Inc. to push a controversial land swap and hotel deal with McCormick Place on property just north of the convention center. Both were then clients of Mr. Madigan’s law firm, Madigan & Getzendanner, but the speaker denies any connection.

Very interesting.

— Finally, Inside Mortgage Finance and Rachel Kurzius have some fun with my tongue-in-cheek suggestion that they give Angelo Mozilo a column a la American Banker and Andrew Kahr.

Alas, they’re going to have to take a pass:

Perhaps the largest roadblock is the format of our publication - straight news and data. Opinion pieces haven’t yet made their way into our pages. Even our blogs steer clear of editorializing. You won’t find the plotting of Mr. Kahr’s sort in our publication, mainly because we prefer to cover actual events, proposals, legal issues and regulatory hearings. Often, we will interview people who agree with the notion that the CFPB should be leaderless, and those opinions will be included in our stories. But we like to call up the Cordrays of the world, too…

The final roadblock to Mozilo’s column is the lack of bylines in Inside Mortgage Finance’s print edition. To be fair, I’ve never met Mozilo. Yet something tells me that he’s a guy who prefers his name placed prominently next to any of his accomplishments. Our layout would preclude such a display. We’ll never be able to give Mozilo a column with his name on it, as you suggested.

I suppose we’ll have to wait for Angelo to get a Tumblr.

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.