 Quote:
Originally Posted by Oldbabe
Looks like the 60 minutes story on CDS confused (misled?) me:
"It's a form of legalized gambling that allows you to wager on financial outcomes without ever having to actually buy the stocks and bonds and mortgages.
It would have been illegal during most of the 20th century, but eight years ago Congress gave Wall Street an exemption and it has turned out to be a very bad idea."
"It's legalized gambling. It was illegal gambling. And we made it legal gambling…with absolutely no regulatory controls. Zero, as far as I can tell," Dinallo says.
"I mean it sounds a little like a bookie operation," Kroft comments.
"Yes, and it used to be illegal. It was very illegal 100 years ago," Dinallo says.
The Bet That Blew Up Wall Street, Steve Kroft On Credit Default Swaps And Their Central Role In The Unfolding Economic Crisis - CBS News |
FWIW, they confused/mislead me also.
I do wonder if things like CDS were actually illegal for the last 100 years. I've read they have actually been around since the 1990s. I'm waiting for the WSJ, or Forbes to publish a reaction to the 60 Minutes.
I am sympathetic to the Wall St. firms in one area. The 60 Minutes piece made a big deal how the 2000 legislation prohibited states from regulating CDS. In theory each state is suppose to have the equivalent of the SEC, in reality virtually no state other than New York, is capable or interested in providing regulations for securities. I can't imagine in Hawaii they could find people who were both competent to regulate CDS and willing to get paid as low level civil servant. I am not even sure it makes sense to have insurance companies regulated at a state level, since the insurance commissioner is often a political apointee. But it is silly to make brokerage and investment banks have to conform to 50 different state laws. We would be better of centralizing the regulator function in the SEC.
|