To Jonathan Kanterman, managing director of a $750m fund of hedge funds, regulators must use this moment to cosmically alter their treatment of CDSs. “Once and for all they must recognise these contracts as insurance policies and require sufficient capital...
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To Jonathan Kanterman, managing director of a $750m fund of hedge funds, regulators must use this moment to cosmically alter their treatment of CDSs. “Once and for all they must recognise these contracts as insurance policies and require sufficient capital reserves,” says Mr Kanterman. He points out that the majority of the $787bn US bail-out programme actually went to stabilise CDS trades. The issue is especially critical, he says, when we see underwriting of swaps that are many times the size of the underlying debt. “Even with sufficient capital, this could lead to dysfunctional, destructive market behaviour,” Mr Kanterman says.
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