Sunday, October 26, 2008

A Primer on Credit Default Insurance, and more, from the New York Times

Via Visualizing Economics:

Credit Swaps Insurance Market: 2000-2007

New York Times Graphic: 2/17/08
In the Shadow of an Unregulated Market

New York Times Graphic: 2/17/08
A Primer on Credit Default Insurance
February 17, 2008 (Gretchen Morgenson, NY Times)
Arcane Market is Next to Face Big Credit Test

"The market for these securities is enormous. Since 2000, it has ballooned from $900 billion to more than $45.5 trillion — roughly twice the size of the entire United States stock market."

"No one knows how troubled the credit swaps market is, because, like the now-distressed market for subprime mortgage securities, it is unregulated. But because swaps have proliferated so rapidly, experts say that a hiccup in this market could set off a chain reaction of losses at financial institutions, making it even harder for borrowers to get loans that grease economic activity."

February 27, 2008
Small and Midsize U.S. Banks Beginning to Struggle in Credit Crisis

"..But the breadth and depth of the current troubles have caught bank executives by surprise."

Related NY Times Graphic:


Who's Watching Your Money? (Robert M. Morgenthau, April 30, 2007, NY Times Op Ed)

"...the United States Supreme Court upheld an ill-advised regulation issued by the Office of the Comptroller of the Currency, exempting subsidiaries of national banks from regulation by state banking authorities. This regulation makes the comptroller the exclusive regulator of these banks, even though the office is financed almost entirely by the banks it oversees...."

A Hands-Off Policy on Mortgage Loans (Edmund L. Andrews, NY Times Business, July 14, 2005)

"The reason is that federal banking regulators, from the Federal Reserve to the Office of the Comptroller of the Currency, have been reluctant to back up their words with specific actions. For even as they urge caution, officials here are loath to stand in the way of new methods of extending credit."

""We don't want to stifle financial innovation," said Steve Fritts, associate director for risk management policy at the Federal Deposit Insurance Corporation. "We have the most vibrant housing and housing-finance market in the world, and there is a lot of innovation. Normally, we think that if consumers have a lot of choice, that's a good thing.""

"...Despite their hands-off approach, some regulators are worried that banks and other mortgage lenders may not have properly judged the risks to themselves. They warn that speculative buying has increased, with many people hoping to quickly resell houses and condominiums before the construction is even finished..."

2005 Related NY Times Graphic:

Betting on Rates (NY Times Graphic)

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