SEC Calls for Power to Regulate Credit Default Swaps « The Washington Independent
In the wake of the request by European leaders to institute (at a minimum) mandatory reporting and more regulation of credit default swaps, the Securities and Exchange Commission is jumping on the regulation bandwagon. In a statement by its chair, Mary Schapiro called for regulation of credit default swaps similar to those faced by regular securities.
Reuters had asked Schapiro whether there should be any ban or limits placed on naked swaps, where the holder of the swap does not own the underlying bond.In reply, Schapiro said credit default swaps are often used as substitutes for securities and directly impact the markets.
“As such, they should have at least the level of oversight and transparency that are present in the regulated securities markets,” she said.
Her statements echoed those of Commodities Futures Trading Commission Gary Gensler, who said earlier today that the lack of regulation in derivatives trading allows Wall Street to benefit from market inefficiencies (i.e., that they profit off of investors who they deliberately keep in the dark) rather than from underlying value. Not that it matters to the financial services industry: Money is money, whether it comes from less-than-savvy investors or Treasury coffers.