The FCIC did in fact that they believe that the reason for the economic hurricane was due in part to derivatives. Using debt that was in default or at the brink of default in exchange for collaterized debt couldn’t have possibly been a good idea. Right? These two types of derivatives were contributors no doubt, but were they the only ones?
The bigger challenge was that these derivatives were not being regulated. What? That’s right, no one was watching, and what did we expect? We are all entitled to our opinions, but the truth cannot be dispelled. This is why AIG could do what they wanted without having to consider the ramifications, and so thoughtlessly this continued and turned into a bigger mess than anyone imagined. I can’t believe that no one was accounting for these derivatives to ensure that there was money to back it up.
Credit default swaps were so called insurance policies, although after hearing what I have heard I am not sure I would call that insurance. These swaps sold as securities are an interesting business, but we can all see how this didn’t work with mortgage loans. Derivatives in themselves were not the problem, but how they were being used is, as well as the fact that they were not being monitored whatsoever.
-Mayer Dallal
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