Credit default swaps: Monolines face litigious and costly endgame
When George Soros describes something as “hanging over the financial markets like a Sword of Damocles that is bound to fall”, it warrants attention. This is how he recently characterized the prospect of some CDS counterparties being unable to fulfil their obligations following a credit event or default. “The market is totally unregulated and those who hold the contracts do not know whether their counterparties have adequately protected themselves,” he added.
These concerns are nothing new – but the bail-out of Bear Stearns in March has pushed them to the top of the agenda.
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