Frank Curcio Realty
Trading a protection policy, designed by mathematicians and physicists, purchased from a seller in order to protect the value of a financial investment, is called a Credit Default Swap (CDS). It appears to be an insurance policy purchased to protect the value of an asset; however, a swap is not regulated insurance. Law professor and former director of the Commodities Futures Trading Commission Dr. Michael Greenberger, told 60 Minutes correspondent Steve Kroft on October 5th 2008; "A credit default swap….is an insurance contract, but they've been very careful not to call it that because if it were insurance, it would be regulated. So they use a magic substitute word called a 'swap'….”
Insurance regulations require reserve capital to pay the insured. Professor of Economics and Law, Dr. William K. Black, author of the best selling book The Best Way to Rob a Bank is to Own One; said during congressional testimony on October 14th 2008 that these derivatives were “casino investing.” While “…hedging and futures trading is an integral part of financial markets…swaps have circumnavigated the regulators.”
On March 4th 2003, the BBC reported that legendary investor Warren Buffet said, “the derivatives market has exploded…with these investments to…manage market risk…” Buffet argued they “…are time bombs and financial weapons of mass destruction that could harm…the whole economic system.”
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