Shorting the custodes

Now that the JV Hedge fund between the Treasury and the FED has stated that they will run the carry trade into perpetuity using sovereign scrip as the funding currency one wonders, Quis custodiet ipsos custodes?(a Latin phrase from the Roman poet Juvenal, variously translated as "Who watches the watchmen").

In September of 2007,the FED put out a study in the Federal Reserve Bank of New York’s Economic Policy Review called 'Hedge Funds, Financial Intermediation, and Systemic Risk.'

It stated:

Largely unregulated hedge funds,complicate CCRM (counterparty credit risk management) through their unrestricted trading strategies, liberal use of leverage, opacity to outsiders, and convex compensation structure.

Sound familiar?

Unrestricted trading strategies : B.S. Bernakke states he will monetize a cow
Liberal use of leverage : 53 to 1 and rising
Opacity to outsiders : Bloomberg suit
Convex compensation : Wall Street

The study concludes that the current emphasis on CCRM as the primary check on hedge fund risk-taking is appropriate.

So what provides CCRM on the Federales hedge fund?

That would be CDS on the sovereign debt...which once again hit a record high today.