Hollywood's Other Problem Has Nothing to Do With Political Correctness
Florida Brings the Hammer Down on Would-Be Rowdy Spring Breakers
Confronting DeSantis at Barnes & Noble
MTG, Democrats Offer Two Different Views After Touring DC Jail Where J6 Defendants...
Pentagon Diversity Officer Won't Face Discipline for Anti-White Tweets
Biden Is Unhappy With Kamala Harris's Performance as VP
Republicans Criticize Biden’s Response to Airstrikes In Iran: 'Too Little, Too Late'
These Schools Removed Cops to Appease BLM—It Didn't End Well
Greta Thunberg Sees a Great Capitalist Conspiracy Against the Climate
Xi and Vlad, a Wake-Up Call for America and the West
Bullies Rule Under Woke Discipline Policies
Europe Extends Sanctions Against Iran
The P-8 Poseidon Is Increasingly Important for the Defense of Our Nation
Suspicious Package Containing White Powder and a Threatening Note Arrives at Bragg's Offic...
Democrats and Republicans Plan Visit to Prison Where Jan. 6 Defendants Are Being...

Credit Default Swaps

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

WASHINGTON, D.C. -- "60 Minutes," the popular CBS news program, normally doesn't deal with global finance, but last Sunday (Oct. 5) its lead story tried to isolate the cause of the current global financial meltdown. It selected a financial derivative: credit default swaps.

A credit default swap is nothing more than insurance that a bond transaction will be repaid. The problem is that this has developed into a massive market estimated in the United States by participants in the market itself at a staggering $60 trillion. Nobody denies the usefulness of credit default swaps. The problem is that this market is totally unregulated. The use of the word "swap" makes it impossible for federal regulation, which would take place if it were identified as insurance.

The tone of the "60 Minutes" story was that this huge unregulated shadow market is a principal cause of the frightening global crisis. I could find no financial expert with whom I consulted who agreed with this analysis. They did say the big unregulated market has contributed to the chaos, but the root causes go deeper.

David Smick, a prominent financial consultant and author of a new book "The World Is Curved," attributes the deepening problem to "a dangerous ocean of money" around the world.

However, there is widespread agreement that this unregulated "shadow market" contributed to the chaos and must be regulated.

This supports the Democratic mantra that insufficient regulation by Washington is the cause of the current turmoil, but it hardly supports Barack Obama's thesis that the basic problem is the rich getting richer at the expense of ordinary investors.

The big investment banks, using these credit default swaps for their own benefit, ended up losing everything, as such famous financial houses as Bear Stearns and Lehman Brothers failed, the victims of their own greed.

Join the conversation as a VIP Member


Trending on Townhall Video