Capitol Hill Blue Forums Political Issues Finance, the economy & Economics How will the financial crisis develop?

Ardy...
In the interest of fairness, and re: our longstanding discussion of derivatives, and CDS's, here's an article that leans toward your contention that the CDS's are not the megamonster that they have been pcitured to be...
About Lehman and CDS's

I thought you might be interested.

That being said, however, I confess that I really didn't understand the mea culpa intent of the author. The position taken seems to be that the industry is/was capable of regulating itself, and that the settlement of the Lehman accounts was a relatively simple thing. My thought is that if this is truly the case, why hasn't someone... anyone... been able to bring these instruments to a settlement, and if it is true that the $500 Billion was actually settled @ about $5 Billion, then why didn't the Fed go through with buying the securities that were supposedly in question when the $750 Billion was requested. If the derivative swaps could be settled with a fraction of the notional value, at Lehman, then why not at the other Banks and Brokers?

As to the wording of the article, either it's obfuscatory or I've lost my ability to understand the written word.

There's definitely a wide gap between Notional, and Actual Value, that occurs when the same security is insured and then reinsured, and each teansaction is counted into the cumulative total, but I understood that the problem was caused by the failure or inability to retrace the path back to the source. According to what I read in the article, the transactions would seem to be under control.

Somehow, the explanation smells fishy to me, but am posting the link in the interest of full disclosure.