BLYTHE MASTERS!!!!!!!! This is the person who invented this instrument which should have never existed, this is the instrument that has taken down some of the biggest names in HISTORY. I wonder if BLYTHE is creating anymore type of of investment instruments at this time... The Birth of Credit Default Swaps (CDS) A young Cambridge graduate by the name of Blythe Masters came up with the idea of âInsurance per Bettingâ which was quickly put into reality by all the leading banks. The Credit Default Swaps (CDS) were born. No longer âdue diligenceâ seemed to be necessary, when approving loans. In case of credit default the buyer of the risk paper had to pay. This buyer, like an insurance, is paid regular premiums by the lending bank. As a result of this madness, 40% of all the recipients of loans are not creditworthy, according to Fitchâs rating agency. A direct result of the âinsurance-mentalityâ. In 2002, in the early days of CDS, it was just 8%. This whole system worked well for all parties, the banks got rid of the risks, and the âinsurerâ had a regular income at least for some time, as long, as the economy is not in recession and thus defaults on loans are minimal, as it was the case during the last 15 years. The CDS became so popular, that by now the unbelievable sum of 65.000.000.000.000 US Dollars has flown into this market, double the value of 2500 leading US companies trading on the US stock market. Madness galore. With no limitations existing in terms of how high to âinsureâ those loans, the inflation of these risk papers per loan has become the order of the day. When US automotive parts company Delphi went into bankruptcy , the bad loans were amounting to 5 billion US Dollars, the CDS sums for these loans, however, amounted to 25 billion. Illegal excess-insurance under normal circumstances. The Swap market, however is ruled by different laws, mainly lawlessness. Excess-insurance has become the order of the day.