Greenspan lashes out at credit derivatives industry

Alan Greenspan, former chairman of the US Federal Reserve Board, has found it “appalling” that banks were trading credit default swaps (CDS) and documenting them on scraps of paper. Speaking at the Bond Market Association’s (BMA) 30th anniversary dinner in New York yesterday, he also expressed dismay at how long it took to confirm trades in a technically advanced industry.

“The difficulty is that while this is an extraordinary business, I was shocked and surprised that we were confronted by an operation issue,” said Greenspan. “There’s been significant improvement, but why does it exist in the first place?”

However, Greenspan also highlighted the credit derivatives market’s stabilising effect on the international financial system. “CDS, I think, is probably the most important instrument in finance. For decades we struggled to have maintainable prices. Most funds

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