Thursday, October 30, 2008

The Credit Default Swap Story


Watch CBS Videos Online

This is a great piece and educational tool on one crucial piece of the cause of the real estate market meltdown. It kills me that Congress could be so blind back in 2000 to legalized gambling for Wall Street, with no regulatory control at all, after it was deemed illegal 100 years ago.

"Credit Default Swaps," or "Credit Derivatives," is the bundling and selling of mortgages and the so-called insurance that was used to assure investors they were safe. These were "side bets" about whether a companies stock price will go up or down, and could be made without actually owning the stock, similar to betting on a football ball game. When real estate prices fell, these were bad things to have around, because everyone thought real estate prices would rise and not fall (a bad bet in hindsight.)


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