Credit Default Swaps — What Is Really Killing the Big Banks?

Here is a linke to my post on The Globalist about CDS and the banks:

http://www.theglobalist.com/StoryId.aspx?StoryId=7529

To comment about “low beta” assets:

AIG’s sin was thinking it could buy low-risk growth through CDs, but even veteran CEO Hank Greenberg failed to understand the true risk of insuring credit losses. And the sad part is that in chasing growth by taking risks with CDs, Greenberg and AIG were entering a relatively low-margin business compared with traditional insurance.”

The back story on evolving CDS legislation in DC is very interesting.  Bottom line is that HouseAg Committee is searching for relevance in the post bubble era, but we are headed toward a “final solution” on CDS that I hope will provide greater relevance for most investors and less systemic risk.   The folks at ISDA are “concerned” about the House Ag bill (see 2/13/09 news report by clicking here).  That is good.

Chris

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