credit default swaps
The biggest threat to our financial system are the CDS's. As I understand these CDS's they represent insurance to the lender against the default of the borrower. There is no problem with this simple insurance transaction between two parties. The problem is third, forth fith etc. party transactions. Individual organizatios bought and sold CDS's without owning the underllying instiments leaving the phantom insurers at risk. I would refuse to pay the insurance to those investers that did not own the original loan. They would lose there original investment which would be a small percentage of the aount to cover the insurance..
Comments (2)
I have been ranting and raving against CDS, at least when not supported by an insurable interest, for at least six months.
The idea of refusing to pay those who did not own the underlying debt makes some sense: such contracts are for an illegal purpose (trashing the credit ratings of the vicimized company) and should be unenforceable as a matter of public policy.
Jim Cramer was on the subject tonight - maybe he will popularize it.
Posted by TomA47 | October 14, 2008 6:43 PM
Debt ceiling talks were tabled by GOP Rep. Eric Cantor a week ago. Amongst the worried pressure this engendered, a question arose as to whether Rep. Canton may have a personal incentive. Salon states that although Cantor exclaims to fight for the U.S. economy on the floor of Congress, his private investments signifies that he'll really benefit if the nation goes into credit delinquency. Here is the proof: Rep. Eric Cantor will profit if US suffers credit default
Posted by CynthiaH | June 30, 2011 2:05 AM