Probably because mortgages are not commodities, and thus outside their purview
Collateralized mortgages are a form of derivative and should have been under their purview. Except that Congress allowed these to be traded off exchange and bypass CFTC oversight. So it isn't the CFTC's fault that these remained unregulated.
A decent analogy is buying fire insurance on your neighbor's house if you can't buy insurance on your own, because your neighbor is likely to catch fire if you do.
A better analogy is that the market wrote 5x the insurance coverage for your aggregate neighborhood. So if you didn't buy insurance for your house, 5 other people bought policies on it anyway. Or 10 people bought policies on every other house, etc.
The idea that risk hedging instruments can be traded separately from their underlying asset is crazy enough. But to allow companies like AIG to generate multiple policies on selected assets is far worse.
Often if you own the ref ob but don't want the credit risk, it makes more sense to sell the ref ob than to buy CDS on it.
Lets take this idea one step further: If you don't like investment risk, stay out of the markets. We are under no obligation to provide rich people with places to park their capital with zero risk and high returns. If you don't like risk, stuff your cash in your mattress.
Yeah, I know the argument about allowing people to hedge risk or they will just take their money away and the economy will stall. Take it where? It turns out that all the mortgage security risk hedging served no purpose other then to create a huge housing bubble anyway. We would have been better off without that activity.
In 2005, Intrade specifically made an agreement with the CFTC not to trade options on commodities and futures. Then in 2011 they broke that agreement by offering options on commodities and futures, thus resulting in the CFTC filing a lawsuit against them.
So, it was a territorial dispute. Like what goes on with the Mob.
The CFTC didn't do squat to regulate the CDO/CDS markets surrounding mortgage debt. So it looks like their only function was to keep competitors out of the business. If this was garbage pick up in New Jersey, they would have sent a couple of enforcers over with iron pipes. Thank goodness we have the courts to take care of that for them.
In general terms its called "insurable interest". If you are exposed to a loss and you hedge against it, its insurance. If its not your house (or football team*), its gambling.
*The league has their own regulations prohibiting "insurance" against a loss by those with financial exposure to sporting outcomes like team owners.
So now we understand why allowing "investors" to purchase naked credit default swaps at a rate of 5 for every single derivative covered caused the market collapse. More people stood to make a profit by a failure of the underlying security. No collusion needed. That's how the 'wisdom of the markets' is supposed to work.
Why AIG and half of Wall Street wasn't thrown into prison for operating a numbers racket, I'll never know.
Stay tuned. The investment community wants regulations on "insurable interest" lifted from life insurance policies. That means I'll be able to bet against your grandpa making it to 80.
I do mind advertisers tracking me across multiple sites. Find a way to fix that problem and I'll put up with ad banners. In fact, if some though has gone into their placement, I might be interested in related products.
The party in office always wants unrestricted power to pursue their agenda. The Republicans are looking for porn. The Democrats are looking for taxable events.
The current budget standoff is the best thing that could happen to either side. Whatever they want to do, there is no money for new toys.
HSBC was collateral damage. The USA was after some of its slaves (citizens) that dared to venture off the plantation. They refused to participate in the USA's global posse comitatus and paid the price.
Slashdot Mirror
Probably because mortgages are not commodities, and thus outside their purview
Collateralized mortgages are a form of derivative and should have been under their purview. Except that Congress allowed these to be traded off exchange and bypass CFTC oversight. So it isn't the CFTC's fault that these remained unregulated.
Blame Congress. And Alan Greenspan
A decent analogy is buying fire insurance on your neighbor's house if you can't buy insurance on your own, because your neighbor is likely to catch fire if you do.
A better analogy is that the market wrote 5x the insurance coverage for your aggregate neighborhood. So if you didn't buy insurance for your house, 5 other people bought policies on it anyway. Or 10 people bought policies on every other house, etc.
The idea that risk hedging instruments can be traded separately from their underlying asset is crazy enough. But to allow companies like AIG to generate multiple policies on selected assets is far worse.
Often if you own the ref ob but don't want the credit risk, it makes more sense to sell the ref ob than to buy CDS on it.
Lets take this idea one step further: If you don't like investment risk, stay out of the markets. We are under no obligation to provide rich people with places to park their capital with zero risk and high returns. If you don't like risk, stuff your cash in your mattress.
Yeah, I know the argument about allowing people to hedge risk or they will just take their money away and the economy will stall. Take it where? It turns out that all the mortgage security risk hedging served no purpose other then to create a huge housing bubble anyway. We would have been better off without that activity.
Way to go EU!
In 2005, Intrade specifically made an agreement with the CFTC not to trade options on commodities and futures. Then in 2011 they broke that agreement by offering options on commodities and futures, thus resulting in the CFTC filing a lawsuit against them.
So, it was a territorial dispute. Like what goes on with the Mob.
The CFTC didn't do squat to regulate the CDO/CDS markets surrounding mortgage debt. So it looks like their only function was to keep competitors out of the business. If this was garbage pick up in New Jersey, they would have sent a couple of enforcers over with iron pipes. Thank goodness we have the courts to take care of that for them.
Because you haven't been following the line on Intrade getting shut down.
In general terms its called "insurable interest". If you are exposed to a loss and you hedge against it, its insurance. If its not your house (or football team*), its gambling.
*The league has their own regulations prohibiting "insurance" against a loss by those with financial exposure to sporting outcomes like team owners.
So now we understand why allowing "investors" to purchase naked credit default swaps at a rate of 5 for every single derivative covered caused the market collapse. More people stood to make a profit by a failure of the underlying security. No collusion needed. That's how the 'wisdom of the markets' is supposed to work.
Why AIG and half of Wall Street wasn't thrown into prison for operating a numbers racket, I'll never know.
Stay tuned. The investment community wants regulations on "insurable interest" lifted from life insurance policies. That means I'll be able to bet against your grandpa making it to 80.
Aerial photography to identify empty lots with hobo camps.
Bulldoze and build high rise condos.
Or will this have interchangeable heads that do mask printing, PCB milling, drilling, etc?
But then nobody orders a Ferrari without the hot blond passenger option. So the diamond lane will still be OK.
And then do what they want with the subdomains book. author.
I do mind advertisers tracking me across multiple sites. Find a way to fix that problem and I'll put up with ad banners. In fact, if some though has gone into their placement, I might be interested in related products.
The party in office always wants unrestricted power to pursue their agenda. The Republicans are looking for porn. The Democrats are looking for taxable events.
The current budget standoff is the best thing that could happen to either side. Whatever they want to do, there is no money for new toys.
Can we load all of Texas onto a rocket and send it to mars? One way?
HSBC was collateral damage. The USA was after some of its slaves (citizens) that dared to venture off the plantation. They refused to participate in the USA's global posse comitatus and paid the price.
I'm all for visiting the Apollo 18 site.
Trust me. The easiest girls to get working the brass pole are the ones who were 'protected' when they were young.
makes men stop desiring their wives (because they are not willing to do the bizarre fantasies of their husbands).
Nope. Its the nagging.
To quote a post I saw elsewhere: "A keyboard needs to be tough enough to beat a man to death with. And then write his obituary on afterwords."
Don't worry. It's got battery backups.
Oops!