Credit default swaps were one of the core agenda items at the G-20 meeting this weekend.
Specifically, CDS are the focus of one of the four “Immediate Actions by March 31, 2009” to which the G-20 agreed:
“Supervisors and regulators, building on the imminent launch of central counterparty services for credit default swaps (CDS) in some countries, should: speed efforts to reduce the systemic risks of CDS and over-the-counter (OTC) derivatives transactions; insist that market participants support exchange traded or electronic trading platforms for CDS contracts; expand OTC derivatives market transparency; and ensure that the infrastructure for OTC derivatives can support growing volumes.”
(2 of the other 3 urgent action items involve keeping credit rating agency’s honest; and the last one involves ensuring that financial institutions have sufficient capital).
The members of the G-2o also “request our Finance Ministers to formulate additional recommendations” to “Strengthen … the resilience and transparency of credit derivatives markets and reduc[e] their systemic risks, including by improving the infrastructure of over-the-counter markets”.
In fact, it was President Bush who pushed the approach of oversight and regulation – instead of banning – of CDS:
While pledging to work together on beefed-up regulation of murky investment tools such as credit default swaps, which lie at the heart of the current crisis, the summit said it was crucial not to go too far.
Again reflecting Bush’s demands, the G20 said it would strive for new regulation that is “efficient, does not stifle innovation, and encourages expanded trade in financial products and services.”
In other words, America’s financial elite – the very people who allowed the exponential expansion without oversight of CDS and other ” murky investment tools”- pushed for an approach which would would not hold accountable those who created the CDS hurricane in the first place . (Paulson and Greenspan were obviously big derivatives cheerleaders. But the U.S. Congress aided and abetted this mess, as did some of Obama’s top economic advisors; and see this).