Credit Default Swaps

I was reading the Article in Wikipedia about Credit Default Swaps. As always Wikipedia offers great information mostly not biased. This quote I particularly find interesting, from the article:

Credit Default Swaps were invented in 1997 by a team working for JPMorgan Chase[7][8][9]. They were designed to shift the risk of default to a third-party, and were therefore less punitive in terms of regulatory capital.[10]

Credit Default Swaps became largely exempt from regulation by the SEC and the CFTC with the Commodity Futures Modernization Act of 2000 , which was also responsible for the Enron loophole. President Clinton signed the bill into Public Law (106-554) on December 21, 2000.

And this is also an interesting Tidbit. Actually this whole article is very interesting. The Systemic Risk of a CDS is especially big, because it still is a private contract!

So here comes the joint Press Release of

The Role of the Federal Reserve in Preserving Financial and Monetary
Stability – Joint Statement by the Department of the Treasury and the Federal
Reserve

regarding “Sytemic Risk” and more. Also note in point two

not to allocate credit to narrowly-defined sectors or classes of borrowers.

And here come the statements from Treasury Secretary Timothy Geithner and Chairman Ben S. Bernanke.

The global financial F*ck-Up

One thing is for sure! The global financial System has to become more OpenSource and more transparent.

The house-owners in the US where all promised a house by cheap government funded low interest rates since 2002. The financial system took advantage of that and blew it mathematically out of proportions, with its unregulated derivatives. Thank you Mr. Greenspan and Mr. Clinton.

Now the Bloggers are discussing what to do with the 700 Billions.

I think this is a good idea. Lets just discuss this a bit before we go ahead and spend all that money once again – for the banks.

The government should keep its promise and spend the money on the promised houses.

Always keep a promise.