This article wrongfully states that investors are buying credit default swaps on Wall Street Banks to protect themselves. Realistically most credit default swaps are used as a speculation tool similar to shorting. The difference is that CDS markets have a lot less reliable liquidity and can easily be distorted by larger traders such as JP Morgan's (NYSE:JPM) "London Whale." Capital markets would be far better if all CDS traded on exchanges and were regulated in a similar fashion to other securities.
Disclosure: I am long JPM.