Credit-Default Swaps To Be Regulated
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
New York State will start regulating a part of the $62 trillion market for credit-default swaps, calling it a culprit in the global financial crisis.
Credit-default swap protection sold to investors who also own the security they’re protecting will be treated as insurance, Governor Paterson said in a statement yesterday. State insurance regulators would require entities selling credit-default swaps in those cases to show they can actually pay the claims if there is a default.
New York said it’s acting to bring supervision to a unregulated market that helped spread the risks generated by subprime mortgages to investors and financial institutions around the world. Banks have posted more than $500 billion in asset writedowns and losses, while the American government has proposed spending $700 billion buying back bad assets.
[The New York Sun yesterday reported on problems in credit-default swaps.]
