"For those of you who like your CDS exposés presented in the mellow tones of Leonard Lopate and Jesse Eisinger over the course of a leisurely half-hour, here you go.
This is a sober public radio progam, not a finger-pointing piece of populism like the awful 60 Minutes piece on the same subject. But it's worth noting a broader dynamic, wherein the least informed commentators are also the most alarmist."
CDS's might be poorly cast, but so were the investors. Here's my comment:
Posted: Oct 29 2008 4:10pm ET
"I had lunch yesterday with Shane Akeroyd of Markit, and he had a more sophisticated take on what we're seeing. The problem isn't CDS specifically or even derivatives in general, he said: the problem is that the world had an enormous amount of leverage, and all that leverage is now being unwound at once. Do CDS make it easier to firms to lever up? Yes -- but if CDS hadn't been around, some other instrument would have been found which had the same effect. Blaming CDS for the market meltdown is like blaming Microsoft Word for a magazine article you don't like: it might have made things easier, but it was hardly necessary."
I agree with this, although, in the case of AIG, it does seem that CDS's were used specifically to reduce collateral requirements on investments.
I keep wondering why, among the myriad reasons being offered, government guarantees aren't often mentioned. Of course, it could be that I'm wrong and they don't matter. But surely, since the world's governments are massively intervening, one should determine if this was expected and used in determining ultimate risk.
There is so much blame to go around, although I suppose I most fault the investors and lenders, and not the investments themselves.
My biggest fear of all this poor reporting or understanding, including my own understanding, is that we're not going to have the guts to really examine what went wrong and what needs to be done, but, like in a novel or movie, pick a hero and a villain. This is not a novel or book.
However, could you please tell Shane to come back?
I agree with this, although, in the case of AIG, it does seem that CDS's were used specifically to reduce collateral requirements on investments.
I keep wondering why, among the myriad reasons being offered, government guarantees aren't often mentioned. Of course, it could be that I'm wrong and they don't matter. But surely, since the world's governments are massively intervening, one should determine if this was expected and used in determining ultimate risk.
There is so much blame to go around, although I suppose I most fault the investors and lenders, and not the investments themselves.
My biggest fear of all this poor reporting or understanding, including my own understanding, is that we're not going to have the guts to really examine what went wrong and what needs to be done, but, like in a novel or movie, pick a hero and a villain. This is not a novel or book.
However, could you please tell Shane to come back?
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