The Black Hole Of Wallstreet

It has now become apparent to me after running across an article from Time magazine, written in March of 2008 entitled Credit Default Swaps: The Next Crisis? that hopes for an economic recovery anytime soon are unlikely. The numbers they quote are accurate and staggering. First I must explain exactly what a CDS is. It is a credit derivative contract between two counter parties. The buyer makes periodic payments to the seller, and in return receives a payoff if an underlying financial instrument defaults. Its designed to work like homeowners insurance to protect against losses like fire and theft, giving the buyer peace of mind. But the big difference is the insurance market is regulated and the CDS market is not. Hedge funds and others on wall street are reaping great profits by betting against Americas corporate and financial interests sucking money out of our Economy and taxpayers pockets, as we try desperately to prop-up these damaged entities, in the form of bailout money. Just how big is this perverse market? according to the International Derivatives Association it exploded to $45 trillion in 2007, twice the size of the U.S. stock market valued at $22 trillion, and huge compared to the $7.1 trillion mortgage market. In addition the 25 top commercial banks hold more than $13 trillion in credit default swap exposure. Banks such as JP Morgan Chase, Citibank, Bank of America and Wachovia. As these bad bets as the Obama administration has coined them, continue to be made a cycle of losses land on their victims balance sheets, and in turn the taxpayer is left riding the Credit Default Swap roller coaster. The proof is in the pudding as Chrysler files bankruptcy today, and this administration points its finger of blame at hedge funds, but fails to correct the problem when it has the power to do so.