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Credit derivatives gone wild

10/07/2008

Long-time readers know I have railed about the potential problems from credit derivatives, such as credit default swaps. They must have been designed by financial engineers gone wild! Because they are not regulated nor traded on any exchanges, there is far too little information to evaluate the problem. On Sunday, I talked with the Fed’s top economist on this and was impressed he understood the issues so well. In addition, CNBC reported Monday that the Fed is talking to various exchanges about listing credit derivatives. At long last, it looks like the problem is being addressed . . . better late than never!

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