Crime and the Credit Swap Derivatives

The Credit Swap Derivatives, a form of insurance policy for bonds and other investments, is coming under the microscope for fraud. This is in the wake of the collapse of AIG insurance co., and its bailout by $120 billion or more by the US Government. AIG is being investigated, along with CDSs (Credit Derivatives Swaps) in general by the NY State Attorney General and federal prosecutors as well. On question being asked is if somehow the market was manipulated to drive down stock prices.

The cost of this protection, is called the "spread." At least I think so. Anyway, the spread got pretty bad on Lehman Bros bonds at a certain point before they went into bankruptcy, and were sold/given to Barclays Securities. One source said recently that Lehman Bros bonds are now going for 6-cents on the dollar. The situation has also deteriorated for the bonds, the debt, etc of Morgan Stanley and Goldman Sachs, though both of those companies are still in business under their own name.


According to the New York Times, Oct 20th:

"Collaborations between the New York attorney general, Andrew M. Cuomo, and the United States attorney in Manhattan, Michael J. Garcia, are not frequent, legal experts say. That suggests the two men believe the case is too big and significant to pursue independently. Representatives for both men confirmed their effort on Friday. The Securities and Exchange Commission is also looking into credit-default swaps."

When the swap prices went up, that helped make money for the people doing short selling. Then the question becomes, was there "manipulation." It seems that there is manipulation in this crap by definition. To force everyone to buy CDS over the last 15 years and then watch it crash is part of the game. Time to zero out and outlaw all of these speculative transactions called financial derivatives.

Ooh, oh, the fuzz are looking at the Depository Trust Clearing Corporation, Markit, and Bloomberg, the makers of the "Bloomberg Machine."