Credit default swaps - a systemic poison in global finance

[jose v]

Credit default swaps - a systemic poison in global finance
In ten years, Credit Default Swaps (CDS) have ballooned into a multi-billion dollar industry which has changed the fundamental character of the financial system and increased systemic risk by many orders of magnitude. CDS, which were originally created to reduce potential losses from defaulting bonds, have turned into cash cows for the big banks, generating mega-profits on what amounts to nothing more than legalized gambling. In the case of insurance giant AIG, losses from CDS transactions have already cost the American people $150 billion, and yet there still has been no serious effort in the US Congress to ban them. Even worse, CDS are the root-cause of systemic risk which connects hundreds of financial institutions together in a lethal daisy-chain which threatens to crash the entire system if one of the main players goes under.


http://www.globalresearch.ca/index.php?context=va&aid=13717