Greg Ip

Long marginalised, the CFTC reasserts itself under a new chairman

Bloomberg

This OTC derivatives market ain’t big enough for the both of us

[Greg Ip] WHEN Gary Gensler was named late last year to head the Commodity Futures Trading Commission (CFTC), the financial industry may have thought him an ally. After all, he had been a partner at Goldman Sachs and later served under Bill Clinton’s famously deregulatory Treasury secretary, Larry Summers. But a book that Mr Gensler coauthored in 2004 might have been a better guide to his predispositions. The cover of The Great Mutual Fund Trap shows a faceless banker playing a shell game. Inside, Mr Gensler warns investors that Wall Street is continuously trying to rip them off.

Barack Obama’s financial appointees have all tended to be pro-regulation, but few are as enthusiastic as Mr Gensler. Read the rest of this entry »

The original article is linked here.

Sovereign credit-default swaps

Muffled signals

Credit derivatives on countries are behaving oddly

GOVERNMENTS in the rich world are announcing record-breaking deficits and their credit ratings are under threat. Yet the market that should be most worried is not. An index of credit-default-swap (CDS) spreads on the seven biggest rich economies maintained by Credit Derivatives Research (CDR), a research outfit, has widened in recent weeks, but still signals half the risk it did in February, before the full scale of the damage to public finances became clear (see chart). The trend holds true even for Britain, which is threatened with a credit-rating downgrade, and Ireland, which on June 8th suffered its second sovereign downgrade in three months.

Dave Klein at CDR admits to being puzzled by the trend. Read the rest of this entry »