Berkshire’s Munger Favors ‘100% Ban’ on Credit Swaps

Since I blogged The Finance 2.0 Manifesto, no one has been able to adequately and comprehensively explain to me the key reason naked short-selling should not be more heavily regulated, let alone exist at all.

I'll accept the answer "it's beneficial for market liquidity" as a reason for it's existence, but I'd point the recent periods where this practice was suspended in some markets, and we experienced reduced volatility, as evidence for it's need to be regulated.

A product similarly 'suspect' to the practice of naked short-selling, is the Credit Default Swap.

Whilst I'm merely a voting Australian pleb in the scheme of things, Berkshire Hathaway Inc. Vice Chairman Charles Munger said he supports "an outright ban of credit- default swaps"

Time will tell as to whether these instruments are more closely regulated. In Australia, the restrictions have been lifted so I guess we'll find out how useful they are in "ensuring market liquidity". Hopefully we don't see a return to the casino antics as written about in Liar's Poker.

Image by plrang


posted by Lee Gale @ 3:06 AM,


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