Credit default swap (CDS) disclosure hides true financial risk

November 6, 2008 by · 1 Comment
Filed under: Stock Market News 

This is a pretty hard-hitting article and it also comes up short to the extent of the problem.  The article talks of only $33.6 trillion dollars of credit-default swaps (CDS).   According to the Bank of International Settlements said their is $516 trillion dollars of CDS worldwide.  Being that the United State is considered the financial epicenter, I would assume our financial institutions have much more exposure than what this article states.  

The good news is that the media is finally acknowledging the real problem in the credit markets that is impeding normal lending.  Once we admit this fact it will make a difficult choice on what to do.  I don’t think the different national governments will let all banks that are insolvent because of these debt insurance contracts.   They will either monetize all the debt or absolve all these contracts.  Either way, will create a very intriguing economic environment.

News:

The most comprehensive report on unregulated credit-default swaps didn’t disclose bets in the section of the more than $47 trillion market that helped destroy American International Group Inc., once the world’s biggest insurer.

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