ToddC

A Credit Default Swap Primer

Mediapro:

I reread my comments. Can you point me to where I blamed, or even mentioned, FNM, FRE or heaped blame on Democrats specifically?

A Credit Default Swap Primer

PaulK:

Couldn't agree more. Polticians are in love with using the tax code to socially engineer electorally pleasing outcomes. Something-for-nothingi... plagues the budgetary process. Each little handout is small as a function of the federal budget, but very large to the organized interest demanding it, which can then deliver votes. Honest politicians (ha ha ha) would say: "I'm voting for XXX not because it's good for nearly everyone, but because its good for my job and the vocal, organized electoral minority supporting it." Inevitably, that which should rightly receive a collective response (poverty, transportation) gets shortchanged.

If people don't like how we're dealing with this problem, Social Security and Medicare, which are about 50x bigger, will blow everyone's mind.

A Credit Default Swap Primer

Paulk:

Agreed, not every idea is a good one. But how do we, as a nation, seperate the good ones from the bad ones in advance? Who gets to decide? What makes their judgment so reliable? Even the great ones get some things wrong, over time. Innovation, sadly, comes at a price. Transparency (which the CDS market does not have) is the first step.

A Credit Default Swap Primer

Paulk:
On an exchange only those who pass the creditworthiness tests of their clearing firm and the exchange can trade, and they have to put up risk-based collateral. Why couldn't that work for the CDS market? It won't stop OTC trading of course but there are undoubtedly some participants who'd prefer the transparency and reliabillity of an exchange.

A Credit Default Swap Primer

Exchange traded, participant creditworthiness, standardized terms, clearinghouse guarantee all make sense. That's how options and futures trade and the system itself is very safe. Requiring an insurable interest is not convincing. I can buy S&P puts w/o owning the S&P. Is there a difference?