Full frontal hypocrisy. Soros runs to the CFTC (Commodity Futures Trading Commission) because someone is "playing games" with a CDS (credit default swap) - as if CDSs aren't already playing games with honest financial activities.

“Manufactured credit events may constitute market manipulation and may severely damage the integrity of the CDS markets, including markets for CDS index products, and the financial industry’s use of CDS valuations to assess the health of CDS reference entities.”

“The CDS market functions based on the premise that firms referenced in CDS contracts seek to avoid defaults, and as a result, the instruments are priced based on the financial health of the reference entity,” the CFTC said.

“However, recent arrangements appear to involve intentional, or ‘manufactured,’ credit events that could call that premise into question.”

- CFTC statement

Here that is in English:

The (CTFC) statement comes in the wake of a controversial arrangement in which homebuilder Hovnanian plans an intentional default next month in exchange for a low-cost loan.

The loan was provided by GSO, the credit arm of Blackstone.

The default stands to deliver a handsome payout to GSO, which is a buyer of credit default swaps contracts on Hovnanian.

Hedge fund Solus (owned by George Soros), which sits on the opposite side of the CDS trade, has sued for damages, alleging the deal amounts to fraud and arguing that it perverts the functioning of the CDS market.

Manufactured credit events may "damage" CDS market: CFTC

But, just in case you think you understand leveraged finance and derivatives, the effect of the CTFC statement is to drive down the cost of these very CDSs.

The cost of protecting against US housebuilder Hovnanian defaulting on its debt using credit default swaps plummeted on Wednesday after the main US derivatives regulator said it might take action against an unusual type of trade that would trigger payout on the derivatives.

Hovnanian is expected to miss a payment on some of its bonds on May 1, likely triggering its CDS, as part of a controversial deal with Blackstone-owned hedge fund GSO. GSO agreed to refinance the housebuilder’s debt at a favourable rate provided the homebuilder miss the debt payment as the hedge fund seeks to make a windfall profit on CDS contracts that it owns.

But the cost of the CDS tied to the company dropped from 36 per cent to 31 per cent on Wednesday, according to data from Markit, after the Commodity Futures Trading Commission made its announcement on Tuesday evening. That equates to a cost of $3.1m to protect $10m of debt, and implies investors are now pricing in a lower likelihood that Hovnanian will default on its debt.

Cost of protecting against Hovnanian default falls after CFTC announcement

The stated rational for the fall may or may not be true. What is clearly true is that the CDS scam is being cranked up a notch; and George Soros "is not pleased" to be out-snookered on his own pool table.

The next time some Libertarian asshole (LA) starts wingeing about government interference in the "free" market by the Consumer Financial Protection Bureau, you can point him at this little kerfuffle, which has attracted quite a bit of attention from the financial press.

According to the LAs, the market should police itself. Yeah, right. Look at the sharks players in this fight. Blackstone - EVIL. Soros - EVIL. CFTC - an agency that Congress and Bill Clinton told not to regulate CDSs in 1998. The honest regulator, Brooksley Born, resigned after the law allowing CDSs was signed. AFAIAC, they can all go fuck themselves.

Hovanian - I lived in NJ for a while, so I know the story. Hovnanian was a very successful home builder that had a solid reputation for producing good quality, affordable houses. But, sometime in the mid-90s, their quality went to shit. An entire subdivision was declared uninhabitable. Substandard materials and construction caused houses to tilt, floors to collapse under the weight of furniture. Hovnanian's reputation went into the toilet; but they survived on account of the great housing bubble. I left NJ decades ago, so I don't know exactly why they are going to default; but it is certainly on their arc of corporate failure. So, even the focal point of the entire CDS fight has a shady reputation.

Of course, unless they follow the financial press (or see the story on Zero Hedge, which is pretty much the LA's Readers' Digest of the financial press), the hard pressed proles (who are criticized for using the CFPB CFTC) have no clue the thievery that occurs daily in the financial stratosphere. All they see are the vapor contrails of the dogfight up there, like this set of headlines.