WASHINGTON (MarketWatch) -- Senators late Tuesday rejected an amendment to a sweeping bank reform bill that would have prohibited so-called naked credit default swaps. Credit default swaps are a form of insurance institutions buy on bonds they purchase to protect them against the possibility that those bonds default. However, naked credit default swaps are derivative investments set up by two investor groups that have no insurable interest but are betting on whether another bond will default or not. The measure, which was introduced by Sen. Byron Dorgan, D-N.D., would have been attached to a bank reform bill under consideration in the Senate. A measure banning naked credit default swaps was approved by the House as part of a bank reform bill it approved in December. "There is not one social or economic benefit to these investments," Dorgan said. The rejection comes after Senate Majority Leader Harry Reid, D-Nev., filed a procedural motion late Monday that requires the chamber to vote mid-day Wednesday to end debate on the bank-reform bill working its way through the Senate. Read about how bank reform bill is close to Senate passage. http://www.marketwatch.com/story/senate-rejects-ban-of-naked-credit-default-swaps-2010-05-18-211800 ....
That's fine. Just don't bail out the losers when there's a "systemic" crash. These bankers want it both ways: heads we win, tails you lose. They want to collect premiums insuring risk, but force taxpayers to eat losses when Bankers get it wrong. Is that Capitalism? Or Fascism? Excessive leverage and the daisy-chaining of derivatives is what creates "Systemic" risk. Wallstreet loves systemic risk because it means they don't have to shoulder losses when they get it wrong. We do (the taxpayers)! And the Senate, of course, does nothing to curb systemic risk because they're whores owned by Wallstreet. http://www.businessinsider.com/senator-admits-that-bankers-own-capitol-hill-2009-5