In brief, I say about Dominique Strauss-Kahn’s arrest, innocent until proven guilty. The markets are under no such obligation of assumption. Speculation and rumor are as viable as fact in bond markets, stock markets, commodities markets, options markets… you name it.
The impact of Kahn’s situation has short-term ramifications on the European debt crisis as most loudly exemplified by the Greek debt crisis. Strauss-Kahn’s personal crisis could slow or alter IMF/World Bank actions.
I am not surprised, but I am disturbed by the general media reaction to the allegations against Kahn. “Innocent until proven guilty” should trump “presumed guilty upon allegation”. Recent examples of the Duke Lacrosse Team and Kobe Bryant loom large as examples of premature media reaction. I hope that cooler heads will prevail; that the facts will come out… either way (possibly somewhere in between)… in the slow, laborious, and languid way that the law dictates. Until then I assume innocence.