So here's the setup: Goldman Sachs and Citigroup, which are, of course, creatures of Wall Street operating near Ground Zero, just finished underwriting  a deal for General Electric where it issued $1 billion in "Islamic bonds" or "sukuk."  These types of bonds operate under sharia law and have never been tested in a western court. They were dreamt up a decade ago to accommodate the greed and needs of laughable projects in places like Dubai. Then, days after GE's issuance of Islamic debt, Dubai had a meltdown. It defaulted on its debt. This was soon followed by the announcement that trading was suspended in billions of these bonds on Monday without warning - an unprecedented move. And if these bonds go, there is no legal recourse for investors to collect. Islamic law labels investors as partners who must accept any losses. My guess is that these kinds of bonds will very soon be relics of the past. The whole mess in the financial markets is kind of like a confusing joke with billions of dollars as the punchline. 

Written by Dave