CDS devices are a scam, they were a primary cause of systemic failure; greed being the other component. CDS’s were unregulated insurance with one major difference, those purchasing ‘em (still) don’t have to have any vested interest in the underlying asset being protected. This makes them a big boy toy, purchase and then the asset can be forced into the ground. Fin corps as groups of gang-bangers...
For instance, you can’t take out a real insurance policy on me, my house...etc.
The bucket-shop laws passed around 1903 made this kind of betting on what happens to securities you don’t own illegal.
Unfortunately, these laws were rescinded (by bipartisan effort) in Clinton’s presidency.
For the 10,000th time I am asking "conservatives" like you whether they have any evidence for that. Like many other socialists, you simply defame without a shred of evidence.
"they were a primary cause of systemic failure;"
This is so silly, it is not even wrong. The financial sysmem is a large dynamical system. It was push out of equilibrium by the Community Reinvestment Act (an outside force) that MANDATED a certain, and increasing over time, proportion of bad loans that could never be repaid. The simplest macro statistic for that is the level of homeownership, which stood at about 65% for decades and shot up in a few years to 69%. The difference, 4 per cent, is about 12 million Americans that cannot pay back their loans. This situation was mandated by Congress. (The other salient statistic is the divergence between housing price inflation and the overall price inflation that occurred immediately after the Act was passed.)
Now, a complex dynamical system absorbs and distributes the impact of an external influence in a complex fashion. In the case of financial system, this absorption was accommodated by CDOs and various other instruments and practices. That' what the free market does well: it efficiently fullfils the demands but does not tell people what those demands should be. "You, the people of America, demand via your elected representatives that the poor should own their homes, so I the market will provide that to you.
Blaming the market for the government failure is both false and immoral.
"greed being the other component."
You must be one of those jokesters who claims to know what greed and gouging are. And, like most socialists, that nebulous special kind of greed is attributed to the nonexistent "rich."
"CDS’s were unregulated insurance with one major difference, those purchasing ‘em (still) don’t have to have any vested interest in the underlying asset"
You recite textbooks here without any analysis. What is the rational for requiring vested interest in the insured asset? Why SHOULD that be a universal principle, thus applying not only to a motor vehicle but also to a stock?
You indicate very little reflection but a great ease with which you defame people.