Greenspan Admits Credit Default Swaps Have “Serious Problems”

Alan Greenspan praised credit default swaps in 2002. But today he admitted to Congress that there were “serious problems” with CDS.

Greenspan told Congress:

“Credit-default swaps, I think, have serious problems associated with them.

***

Excluding credit default swaps, derivatives markets are working well.”

Derivatives are working well, other than the credit default swap market – which is bigger than the entire worldwide economy – and which was a major cause of the collapse of Bear Stearns, AIG, Lehman and the others?

That’s like saying “other than not being strong enough to handle ice bergs, the Titanic was a good ship”.

Or asking President Lincoln’s wife after he was assassinated while watching a play: “other than that, how did you like the play, Mrs. Lincoln?”

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