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In the financial markets you can buy insurance such that if a company fails e.g. Microsoft, you get a payout. It's called a credit default swap. Deutsche bank
by ianpurton 11y ago
In the financial markets you can buy insurance such that if a company fails e.g. Microsoft, you get a payout. It's called a credit default swap.
Deutsche bank sold lot's of this type of insurance.
If the markets had turned and some large companies had gone bankrupt they would not have had the means to pay the people who bought this insurance.
Basically they took very low quality insurance and re-packaged it as high quality insuarance.
- Zigurd 11y agoExcellent explanation. CDSs are insurance. So why can't you buy the equivalent product from an insurer, labelled and regulated as insurance? Because the capital requirements under insurance regulation would have been prohibitive. So why weren't the banks charged with illegally selling insurance products and/or violating insurance regulations? Because fuck you, peon.