Wednesday, February 04, 2009

Rep. Collin Peterson (MN-7) Pretty Good Idea

     Credit Defaults Swaps are insurance for bonds.  Rep. Peterson wants to limit ownership of said insurance to people who actually own the bonds.  This is the right direction.

     Of course, if you wanted to buy some CDSs for 10 million dollars, you wouldn't mind buying one bond in with the mix.  In fact, the total value insured by the CDSs should not be allowed to exceed the values of the bonds, and the total amount of insurance held by anyone should not be allowed to exceed the value of their bond-holdings.

     In New York State we already have a law, says the husband of a Tax Attorney I know, that prevents anyone from buying insurance on something they don't have a material interest in.  This, in small part, prevents people from buying life insurance policies on people they don't know (and, since the profit motive exists, trying to get said people killed).

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