The New York State Insurance Department and Credit Default Swaps: Good Intentions, Bad Idea
Author: Andrea S. Kramer.; Alton B. Harris.; Robert A. Ansehl Robert A. Ansehl..
Source: Volume 22, Number 03, January/February 2009 , pp.22-35(14)
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Abstract:
With the failure of Bear Stearns, Lehman Brothers, the bond insurance companies, and the injection of massive amounts of government money into American Insurance Group, it has become apparent that despite several industry reports recommending “reforms,” the derivatives industry has made little progress toward assuring the safety and soundness of the CDS market. Given the diversity of the various federal proposals for the regulation of CDSs, the necessary delay in achieving consensus with respect to them, and the uncertainty of their enactment, the NYID’s plan to treat CDSs as insurance contracts appears extremely attractive initially. The consequences of shifting covered CDSs from derivative contracts to insurance contracts would be the elimination of precisely those aspects of the CDS market about which there have been no complaints.Keywords: Credit Default Swaps; OTC Derivative Transactions; Commodity Futures Modernization Act
Affiliations:
1: McDermott Will & Emery LLP; 2: Ungaretti & Harris; 3: McDermott Will & Emery LLP.