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Robert Pickel, executive director and CEO of the International Swaps and Derivatives Association, kicked off Crowell & Moring LLP's Credit Default Swaps: Exploring the Controversy Market Forces, Litigation, Regulation, Accounting & Tax conference with a spirited defense of the much maligned derivatives.
"Credit default swaps aren't the cause of the financial crisis," he
said. "The roots of the crisis are in poor lending choices. "Credit default swaps provide a tool that allows investors to get transparency into the pricing of credit. Companies could, and did, use default swaps to manage risk to powerful effect. They were looking to get protection against default, and that is exactly what they received," Pickel commented. To illustrating how useful the swaps have been, Pickel cited the smooth way that the CDS market performed following major defaults by companies like Lehman Brothers Holdings Inc. Pickel also addressed the perception that credit default swaps add more risk to the system saying, "They are risk-shifting, not capital raising tools. ... Risk is neither removed or added; it's simply transferred; it remains a zero-sum game." While he believes that some sort of regulation of the CDS market is a foregone conclusion, Pickel is advocating a measured approach. "We know that credit default swaps will be part of the regulatory reforms that will begin in earnest next year. As we move into the regulatory debate, we should avoid a piecemeal approach and take a holistic look at addressing issues in the market." "The rapid rate of CDS growth is driving a great deal of the regulatory interest in the market," he continued, warning that "these products are very fluid and can be traded anywhere, so it's important that domestic regulatory actions take international concerns into account." - George White See conference agenda See Dealscape post on soaring credit default swaps CategoriesComments
From: rtfanning,
Yo, Pickel pimpimping poison. "They are risk-shifting, not capital raising tools. If youre so confident that these "hedges" are risk shifting then why is this a 2 trillion secret.
Posted on:
December 15, 2008 12:55 AM
From: Peter L. Griffiths,
Robert Pickel fails to mention the conservatorship credit event of Sunday 7 September 2008 which brought about the collapse of AIG, Lehman Brothers, Merrill Lynch etc. I support rtfanning in his request that you publish the home address of all the ISDA members and associates. In particular I would like to know whether Fannie Mae and Freddie Mac are ISDA members.
Posted on:
October 25, 2009 12:17 PM
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As Wall Street looks ahead to a new year sure to be filled with new regulation (and probably a healthy dose of turmoil), dealmakers gathered at a conference Thursday to discuss one of the most controversial topics of the financial crisis ... credit default swaps.
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CDS'are not a zero sum game when certain hedge funds purchased default swaps as insurance and then took huge short positions on the company stock until they eroded the investor confidence!
It is the equivalent of buying life insurance on a third party's life, without their permission, and then arranging the death. CDS' used in such a manner is an "unisurable event".