http://thecaucus.blogs.nytimes.com/2010/05/18/dorgan-is-retiring-but-not-relenting/
Fascinating. What do you think? Is regulating--even banning flat out--naked credit default swaps a good thing?
I'd vote for him.
What do you mean you'd vote for him?
I agree with him if what he says is true. If tax payers could be left holding the bag in any situation it should be illegal. I don't think any progress can be made with financial reform without stopping gambling with tax payers money.
I'd vote for this in a heartbeat.
The sad thing is, if he wasn't retiring, who knows if he would take this stand.
But I like the idea a lot.
Republicans have essentially stopped all financial regulation reform. Even with it being watered down pretty heavily... it's not going anywhere.
No easy answer. I'm not opposed to it, but I don't cherish the idea. In an ideal world it would be unregulated, and when it blew up in their faces (inevitable) they would be the ones left holding the bag and not the taxpayer. Unfortunately that isn't reality, so this will probably become necessary
Essentially it is akin to taking fire insurance out on your neighbours house.
There are legitimate hedging reasons to trade like this - you may have a position
that has no CDS market - so you hedge with the available contract most closely related risk wise.
Is that naked trading ?
The problem is targeting speculation without taking away the legitimate activities.
Insuring credit default is dubious anyway as the crunch showed, when the shit really hits the fan the insurers can't pay up and end up a huge default risk themselves.
It is dangerous as it encourages risky lending in the false belief that credit risk can be hedged away when it has only been turned into another kind of credit risk - a systemic one with the insurer