pittrader1988

America Needs an Independent Clearinghouse for OTC, CDS

www.denverpost.com/opi...

Paul and I were way out in front of everyone when it came to this issue.
We are continuing to post articles here that support what we were saying long ago.

America Needs an Independent Clearinghouse for OTC, CDS

More academic evidence that the Paulson plan is not the way to go. www.chicagogsb.edu/ema...

And an article from the WSJ that back's up our claim:

online.wsj.com/article...

America Needs an Independent Clearinghouse for OTC, CDS

pajamasmedia.com/blog/.../

The Bloomberg link to Peterfly is interesting. Terry Duffy on CNBC said that they have a mathematical algorithm that figures out the amount of margin needed for CDO's. This will protect the clearing house from systemic risk. Today for futures, they use SPAN, CME's patented and proprietary software to figure out margin on futures.

America Needs an Independent Clearinghouse for OTC, CDS

Schumer has called for all the regulation to be out of NY, and through the NY Fed. Guess who has them in their back pocket?

We picked Fannie and Freddie because they are classic quasi government agencies that lead to distortions in the marketplace, and blew up. The same would happen if the IBanks ran their own clearing.

By the way, today I have been listening to people go on tv and tell the public that the interbank market is okay. The TARP is spending money, and injecting onto bank balance sheets.

They are still wrong. The counter party risk that existed before the bailout still exists. What if the assets on the banks balance sheets are worth even less than they estimate? Then more capital will need to be injected to prop them up.

The only way to find out what this stuff is worth is to create a competitive marketplace and have bids and offers. If you clear the stuff through a clearing house, you eliminate counterparty risk. This should lead to better pricing, because the sellers and buyers won't need to price in that risk.