Prompt Cast
The Rise and Risks of Credit Default Swaps
TLDR Credit default swaps are unregulated financial instruments that allow banks to issue insurance policies on debt, resulting in a $62 trillion market. The collapse of Lehman Brothers was caused by the credit default swaps, not the subprime mortgage securities.
Timestamped Summary
00:00
This podcast episode is about credit default swaps and the hosts are going to try to make it sexy.
03:23
Credit default swaps are financial instruments that are like insurance policies on debt, and they were originally issued on municipal bonds in the late 90s.
06:53
Credit default swaps are unregulated financial instruments that allow banks to issue insurance policies on debt, which can be sold to anyone and cover any type of debt, resulting in extra income for the banks.
10:33
Credit default swaps are unregulated, which means that disputes over whether a credit event has occurred and triggered payment can result in lawsuits and mediation, although there is an independent arbitrating panel for credit default swaps.
13:47
The credit default swaps market grew from zero to $62 trillion in just a decade, making it one of the largest markets in the world, and the collapse of Lehman Brothers was caused by the credit default swaps, not the subprime mortgage securities.
17:20
The collapse of Lehman Brothers was caused by the credit default swaps, not the subprime mortgage securities, as people turned to their credit default swaps when the subprime mortgage securities went south, only to find that the people who owned their insurers policy didn't have the money to pay them.
20:29
The credit default swaps market is being tamed but there is still a lack of regulation and oversight, leading to the need for more regulation in the future.
23:47
The hosts address a listener's email about the use of "I" and "me" in compound objects, and argue that the point of communication is to get the idea across, regardless of grammar rules.
Categories:
Society & Culture
