Thursday, February 25, 2010
In reading about the many problems confronted by the Greek government in trying to, somehow, become a bit more prudent with the nation's finances, it quickly becomes clear that credit default swaps and other credit derivatives have been and still are playing major roles.
Word comes in this Reuters report that the SEC is now taking an active interest in these products that one former Fed chairman used to speak glowingly about.
SEC examines destabilizing effects of CDSIn this report it is learned that the notional value of the derivatives market now stands at about a half quadrillion dollars (yes, that would be almost $500 trillion) and that elected officials in Washington, thus far, are making little or no progress in moving forward with any kind of regulatory reform.
Securities regulators said on Thursday they are examining the potential abuses and destabilizing effects of credit default swaps, a financial instrument that can be used to speculate on an issuer's credit worthiness.
The Securities and Exchange Commission comments come after Federal Reserve Chairman Ben Bernanke said regulators were looking at how Goldman Sachs and other Wall Street companies helped Greece arrange derivative deals. The SEC would not confirm or deny it was investigating Goldman's role in Greece.
"As an agency, we have been examining potential abuses and destabilizing effects related to the use of credit default swaps and other opaque financial products and practices," SEC spokesman John Nester said.