Tuesday, September 23, 2008

Senator Dole Tries to Get Information on the Role of Credit Derivatives in Last Week's Debacle

Senator Dole asked about credit derivatives in her Q & A time at the Senate Banking Committee hearing on the financial bailout. She wanted to know:

What role did credit default swaps play in last week's failure?

Not one of the members answered her question. Only the SEC Chair addressed the need to reign in the huge, unregulated credit default swap market.

Credit derivatives are part of the junk financial innovation perpetrated by Wall Street the last ten years. They don't have a long and storied role in America's financial system, despite Hank's assurances.

Christopher Cox noted such instruments support credit for the market. They're the peace of mind for debt buyers. What none said, they soared last week and it strangled the market.