Thursday, October 23, 2008
Alan Greenspan praised credit default swaps in 2002. But today he admitted to Congress that there were “serious problems” with CDS.
Greenspan told Congress:
"Credit-default swaps, I think, have serious problems associated with them.
Excluding credit default swaps, derivatives markets are working well."
Derivatives are working well, other than the credit default swap market - which is bigger than the entire worldwide economy - and which was a major cause of the collapse of Bear Stearns, AIG, Lehman and the others?
That’s like saying “other than not being strong enough to handle ice bergs, the Titanic was a good ship”.
Or asking President Lincoln’s wife after he was assassinated while watching a play: “other than that, how did you like the play, Mrs. Lincoln?”