> I'm saying it's like bike theft and the New York and San Francisco black market: it's a wholly unpunished crime, and so it is rampant. I totally agree with y

> I'm saying it's like bike theft and the New York and San Francisco black market: it's a wholly unpunished crime, and so it is rampant. I totally agree with you. Regarding Credit Default Swaps and Interest Swaps, a lot of this is due to the fact that they weren't regulated like insurance, even though that is how they were being used. I read the other day that some hedge fund had sold CDSs to Lehman to insure against losses on $2 billion of asset backed securities. The hedge fund only capitalized the subsidiary selling the CDSs with $4 million. There is a reason we regulate insurance companies... to make sure they maintain adequate capital to back up their policies. This creates trust in the market that buying insurance will actually protect you. So, like you said, the government has a role in enforcing contracts and preventing fraud. In this case they failed to regulate CDS instruments to ensure proper capital ratios.