Feds Probe Shady Market for Derivatives

Banks may have unfair edge in information on credit-default swaps
By Jason Farago,  Newser Staff
Posted Jul 14, 2009 9:33 AM CDT
Feds Probe Shady Market for Derivatives
People work inside the Lehman Brothers headquarters in New York, Sept. 16, 2008.   (AP Photo)

The Justice Department is probing the market for credit-default swaps, the largely unregulated derivatives that contributed to the financial crisis, Bloomberg reports. Justice is investigating whether big banks have unfair access to price information through their ownership of a private company that provides data to investors. The Obama administration wants to bring transparency to the swap market, where investors speculate on companies’ failure to pay debts.

Currently investors can buy credit-default swaps “over-the-counter,” without alerting regulators. That opacity caused huge problems last fall, when the collapse of Lehman Brothers left credit markets frozen and exposed the degree to which the big banks were intertwined. “This has to be seen as another step towards regulating the over-the-counter market,” one investor says. (Read more credit default swap stories.)

We use cookies. By Clicking "OK" or any content on this site, you agree to allow cookies to be placed. Read more in our privacy policy.
Get the news faster.
Tap to install our app.
Install the Newser News app
in two easy steps:
1. Tap in your navigation bar.
2. Tap to Add to Home Screen.