Tim Geithner was asked whether credit default swaps should be abolished altogether.
Remember, the Nobel economist who helped create the pricing formulas for CDS said the CDS are so dangerous that existing over-the-counter contracts should be voided:
The “solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, and let us start over,” he said, referring to credit-default swaps and other complex securities that are traded off exchanges. “One way to do that, through the auspices of regulators or the banking commissioners, is to try to close all contracts at mid-market prices.”
Many other economists agree. Read more about credit default swaps…
