Terri Duhon
Many of us believe that a financial instrument called a credit default swap is to blame for the current economic collapse. I have also read that credit derivatives are another major point source for the global economic collapse. I didn’t know whether such assertions were correct, because I had no idea what these instruments are or what they do. Preliminary research indicated that I would never understand these seemingly mysterious securitized instruments without the help of an industry insider. Thankfully, I found some very helpful individuals who were willing to talk.
Betsy Mettler
What are credit derivatives? What is a credit default swap? Why were they created, how do they work, and whom do they benefit? Is there anything positive about them, or are they really just instruments of mass destruction? B & B Structured Finance Managing Partner Terry Duhon and Partner Betsy Mettler join us with Web of Debt author Ellen Brown to shed much-needed light on this complex topic.
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I’m not an investor, but seems to me that “selling short” can trigger a chain reaction of pre-programmed stop orders. It can also create the idea that someone out there is selling and they must know something I don’t – so I’m getting out too. So it can be destructive. One might argue that buying with “irrational exhuberance”, can create a false reality as well, but, last I checked, an increase in wealth is a better thing than a destruction of wealth.
Secondly, according to my understanding, a short seller is temporarily borrowing someone elses stock, and will have to return that person his shares in a given period of time. But “naked shorting”, means that the stock was never borrowed, even though the sell transaction was made. In this case, you have artificially created more outstanding shares then are actually in existence and you are debasing the share value. You have, in fact, counterfeited stock certificates.