Who virtually exempted these credit default swaps (created by JPM in 1997) from regulation?

[flpoljunkie]

A. Congress, thats who--in Phil Gramm's Commodity Futures Modernization Act, passed into law in 2000 and signed by President Clinton. Bush's SEC lit the match in 2004 by lifting the leverage requirements previously required of banks. Of course, the rush to 'deregulate' began in earnest with President Reagan.

We need public financing of federal campaigns so Congress will be much more inclined to act in the public interest and not at the behest of the special interests--the financial sector. Senator Durbin will soon reintroduce his bill to do just that.

See http://www.opensecrets.org/industries/indus.php?ind=F to see how much money the financial sector gave Congress in 2008 election cycle.

From the March 15th NYT editorial: 'Following the AIG Money'

A.I.G. was a key player in a type of unregulated derivative called a credit default swap. Such swaps are often defined as a form of insurance because the seller guarantees payment to investors in case their investments go bust. They are not safe insurance in any familiar sense, however, because A.I.G. was not required to set aside reserves in the event of a claim. That is why, when the bubble burst and defaults rose, A.I.G. was unable to make good, provoking the bailouts.

Still, the trading partners knew, or should have known, how dangerous the swaps were. And that is not necessarily the whole story. In the manic years of this decade, credit default swaps took off as a way to bet on the likelihood of default by a firm or an investment portfolio, without having to own any financial interest in the firm or portfolio. That is definitely not insurance, it is gambling. The reason it is not illegal gambling is that, in 2000*, Congress specifically exempted credit default swaps from state gaming laws./b]

http://www.nytimes.com/2009/03/15/opinion/15sun1.html

[Uzybone]

1. But its Obama and Geithners fault

lets focus on the bonuses and not the entire crooked system and those who set it up.

[stillcool]

2. Oh please...nothing happened..

before January 20th, 2009. When was Geithner confirmed anyway?

[high density]

3. It is Obama's fault for not seeing the future in 2000

He should have called up the Repuke Congress in 2000 and told them their law was crappy.

[flpoljunkie]

4. Or, told Bill Clinton not to sign the bill. The CFMA also brought us Enron. Remember Enron?