SEC head calls for transparency on credit default swap

Reuters on Yahoo ^ | 10/18/08 | Chris Michaud

[NormsRevenge]

NEW YORK (Reuters) – SEC Chairman Christopher Cox has called on Congress to pass legislation that would make so-called credit default swaps more transparent, including requiring that dealers in over-the-counter swaps publicly report their trades and the trades' value.

Writing in Sunday's New York Times, Cox noted that the $55 trillion credit defaults market is more than the GNP of all the world's nations combined, and that credit default swaps "play an important role in the smooth functioning of capital markets."

But, he said, "our markets function best when they are highly transparent," while credit default swaps have "operated in the shadows," with "no public discourse nor any legal requirement for these contracts to be reported to the Securities and Exchange Commission or any other agency."

Having been bought and sold widely and in many cases anonymously," trapping large financial institutions "in a web of transactions," the swaps market has left government regulators with "no way to assess how much risk is in the system."

--snip--

He concluded that giving regulators authority "to bring the credit derivatives market into the sunshine" would constitute a "giant step forwarding in protecting our financial system and the well-being of every American."

[Porterville]

A complete collapse.

[Moonman62]

Almost all CDS transactions already go through a private clearing house.

[ken21]

aig management knew that all of those credit default swaps

in their london office were not properly covered.

[TenthAmendmentChampion]

Eliot Spitzer forced CEO Hank Greenberg out of AIG, and then the company went nuts with these policies.

Read this article about Joseph Cassano and his infamous credit swaps.

http://www.portfolio.com/news-markets/top-5/2008/09/28/AIGs-Derivatives-Run-Amok

Thanks Eliot, for ruining our economy!

I wonder if the timing of Hank Greenberg’s ouster was coincidental.

[TenthAmendmentChampion]

Ping

[PGalt]

The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means that a small number of financially “powerful” states stand out among all the rest. The extent to which this process is going on may be judged from the statistics on emissions, i.e., the issue of all kinds of securities. - Vladimir Illych Lenin

[Reverend Wright]

I wish they had done this before they passed the 800 billion dollar bailout, and then spent more billions buying up bank stock.

If the firms that are on the hook for big CDS payouts were identified, then the financially viable firms would be able to borrow at low spreads and the CDS zombies could be put into chapter 7 where they belong.

In my book, this is years overdue.

[rabscuttle385]

Good work, SEC, closing the door after the horses have left.

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[rabscuttle385]

Ping!

[Texas Songwriter]

Day late and a dollar short.

[JSteff]

“SEC Chairman Christopher Cox has called on Congress to pass legislation that would make so-called credit default swaps more transparent”

Of more concern to me would be transparent Carbon Market swaps and purchases. Let's see not just who is buying and selling but their back grounds.

[Son House]

the $55 trillion credit defaults market

what you talkin’ bout Willis?

[eyedigress]

Cox noted that the $55 trillion credit defaults market is more than the GNP of all the world's nations combined

I think we have a problem Skipper.

[eyedigress]

Everyone keep in mind these monies are maturity and don’t realise actual debt. The amount would be half whats actual.

[boomstick]

The “net” notional is even less than that.

Suppose you buy $10mm of CDS, then sell $10mm of CDS on the same company. Since these are two, separate contracts, with slightly different terms, your “total notional” of CDS is $20mm, even though your risk is close to zero.

Unless, of course, your trades are with two different banks, and one of them goes under. Then your risk isn’t so close to zero.

[eyedigress]

Thanks for your input.

I had an entire paragraph written on this and dis-mantled it. All of the securities that are bundled and sold need to have over-sight over a certain limit. Selling AAA to Europe and then folding is fraud. Greed on rates sold this market and we will pay the price.

[Son House]

Question=> How are the mortgages related to “credit default swaps”?

.
“All investors ... are paying a price today for the lack of oversight” of credit default swaps, which Cox describes as being “like insurance contracts on bonds and any other assets that are meant to pay off if those assets default,” he stated.

[Wolfie]

I don’t know. Sounds anti-business to me.

[VOA]

SEC Chairman Christopher Cox has called on Congress
to pass legislation that would make so-called credit default swaps
more transparent,...

Lotsa luck there. As Einstein (supposedly) said:

You can't expect the people that caused the problem
to fix the problem!

We know why Cox is in government...for job security no matter
the scale of the disaster.

Cox may have not been the proximate cause of the disaster.
But he's one of the crowd that sat on the sidelines with their
Ivy League J.D.s and/or MBA degrees...and let it happen.