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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (275737)	10/20/2008 9:14:50 PM
From: kech	1 Recommendation Respond to of 793996

It is a failure of a regulatory regime. Perhaps in the GSEs case but definitely not with respect to CDS. The CDS's are different than the GSE's. But they were private contracts between individual firms. The two parties determined what the reserve was by the insurer and priced the insurance accordingly. It failed -- true. Who was supposed to regulate CDS's? No one. So no regulatory failure ex ante, but ex post we all would say that too much depended on AIG not failing. And when Lehman failed it showed AIG couldn't pay off. So someone should be involved in regulating CDS reserves in the future just as insurance companies are regulated.