In the manic years of this decade, credit default swaps took off as a way to bet on the likelihood of default by a firm or an investment portfolio, without having to own any financial interest in the firm or portfolio. That is definitely not insurance, it is gambling. The reason it is not illegal gambling is that, in 2000, Congress specifically exempted credit default swaps from state gaming laws.
Monday, March 16, 2009
Another reason to keep Congress unseated (except for emergencies)
Guess who exempted credit derivative swaps from gambling legislation:
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