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George Soros Urges Governments To Outlaw ''toxic' Credit Default Swaps

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George Soros urges governments to outlaw ''toxic' credit default swaps

Credit default swaps are “instruments of destruction†that should be outlawed as the world looks to re-regulate the global financial system in the wake of last year’s credit crisis, the billionaire investor and philanthropist George Soros said on Friday.

All here: http://www.telegraph.co.uk/finance/newsbys...ault-swaps.html

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George Soros urges governments to outlaw ''toxic' credit default swaps

Credit default swaps are “instruments of destruction†that should be outlawed as the world looks to re-regulate the global financial system in the wake of last year’s credit crisis, the billionaire investor and philanthropist George Soros said on Friday.

All here: http://www.telegraph.co.uk/finance/newsbys...ault-swaps.html

“Banks must use less leveraging and accept risk on their investments, they should not be allowed to speculate on their own account with other people’s money,â€
Citing the recent bankruptcy of General Motors in America, Mr Soros said that some bondholders had stood to gain more from bankruptcy than re-organisation as a result of their CDS positions.

“It’s like buying life insurance on someone else’s life and owning a licence to kill him,†he said of the swaps, which pay the buyer face value if a borrower defaults, in exchange for the underlying securities or the cash equivalent.

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Can anyone pinpoint one piece of legislation or change of regulation in the UK or USA that has been put in place since the banking crisis that will stop it all happening again? As far as I can see the Government has simply taken hundreds of billions of pounds off us, handed it to the banks, and said "carry on". This really is scandalous. :angry:

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Can anyone pinpoint one piece of legislation or change of regulation in the UK or USA that has been put in place since the banking crisis that will stop it all happening again? As far as I can see the Government has simply taken hundreds of billions of pounds off us, handed it to the banks, and said "carry on". This really is scandalous. :angry:

I think they want it to happen again. Its the only way they can get house prices to go back to theyre delusion of normality, other than massive wage improvements (unlikely)

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banks must use less leveraging and accept risk on their investments

The bail out has allowed them to escape ALL the consequences of their 'investments'. The moral hazard here is huge.

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If Soros is saying this - why haven't others said it!?!?

Maybe because they don't own hedge funds...

"Banks must use less leveraging and accept risk on their investments, they should not be allowed to speculate on their own account with other people’s money," he added. "This may push proprietary trading out of banks and into hedge funds which is probably where they belong."

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a cynic might think Mr Soros finds himself on the wrong side of a trade and is a couple of billion out of pocket

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Can anyone pinpoint one piece of legislation or change of regulation in the UK or USA that has been put in place since the banking crisis that will stop it all happening again? As far as I can see the Government has simply taken hundreds of billions of pounds off us, handed it to the banks, and said "carry on". This really is scandalous. :angry:

Exactly. One reason I'm so uber-bearish on the UK and USA is the general inability to deal with problems. Imo great nations make mistakes and serious issues end up emerging over time.. but they make changes to deal with those issues as they become apparent.

Meanwhile a corrupt elite doesn't deal with distortions when they come and instead profits from them and works to keep the distortions going. Which ultimately breaks down the economy.

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a cynic might think Mr Soros finds himself on the wrong side of a trade and is a couple of billion out of pocket

I have been posting the same thing for the last six months on this board. Buffet has said the same thing as Soros so nothing new. They had to call them CDS's to get round the fact that they couldn't call it "insurance". A valid insurance contract must have a party who has a direct interest with the other side. Insurance is to put the other side in the same position as before-not to profit from it. Your house burns down-you get paid OMV. You cannot have a third party who has also paid the same premium getting a cash sum because your shack goes up in flames. CDS holders had a vested interest in the underlying security going down.

You don't think that somebody, somewhere was getting a few bob from both sides of the trade? As an instance I say "buy this CDS from me (say 6% of face as the premium), the underlying is a pile of crap so you stand to gain a packet. Just cut me in when you collect from my company (AIG anyone?)". Pound to a pinch of sh!t that this went on in this unregulated market.

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Exactly. One reason I'm so uber-bearish on the UK and USA is the general inability to deal with problems. Imo great nations make mistakes and serious issues end up emerging over time.. but they make changes to deal with those issues as they become apparent.

Meanwhile a corrupt elite doesn't deal with distortions when they come and instead profits from them and works to keep the distortions going. Which ultimately breaks down the economy.

Thing is, they can legislate when they want to - in 2002, after Enron and Tyco etc - the US brought in Sarbanes-Oxley pretty quickly. It had unintended consequences (mainly transferring risk from Wall Street to London), but the US legislature at least tried to fix it. This time, nothing. Same for UK. They said they would stop it happening again at the peak of the crisis, andnot a peep now. The Tories and Lib-Dems and the media should be asking this simple question "what has been changed in legislation/regulation to stop it happening again?" - but no, nada.

I agree that the banks are effectively telling a naive and complicit government that they can't change the system because they will break it. I can't believe there isn't a massive campaign to get something done. They've emptied our pockets, our kids' piggy-banks, and stuck their hands down our sofas, all in the name of saving the economy by saving the banks - and yet we have had absolutely nothing in return. No apologies, no legislation, no change. All we've had in return is "if you want things to get better, and having emptied your pockets to bail them out, we'd now like you to borrow loads more from those same banks and endebt yourself even more, whilst we also do the same to national debt, in the vague hope that for some unknown reason the economy improves". The Tories should be shouting about this from the rafters.

Edited by mikthe20

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You don't think that somebody, somewhere was getting a few bob from both sides of the trade? As an instance I say "buy this CDS from me (say 6% of face as the premium), the underlying is a pile of crap so you stand to gain a packet. Just cut me in when you collect from my company (AIG anyone?)". Pound to a pinch of sh!t that this went on in this unregulated market.

"The Airmiles of banking"

(Airmiles: the archetypal wide-open corruption: your company pays our price, and you pocket the kickback).

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