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With the Dow below 10,000 for first time since 1999, it's clear that Wall Street has lost investors' trust. How can this relationship be saved?
We have some ideas here at Fast Money. And it seems like lawmakers and regulators are getting on-board.
Last week we told you about the need for transparency. Now we want to take a look at credit default swaps, which are sometimes called CDS. (In essence they are insurance policies written against mortgage backed securities.)
Critics charge that the rapid growth of the CDS market helped fuel demand for banks to extend loans to people unable to repay their mortgages. They then distributed those loans globally, exacerbating systemic risk when contracts failed.
Dylan and the gang have been saying for a while that confidence can only be restored when credit default swaps are traded on an open exchange in a transparent manner
“The issue involves pricing bad assets going forward,” adds Jon Najarian.
Now, the New York Federal Reserve is getting on board. They said on Monday that they plan to meet with small banks and institutional investors to discuss establishing a central counterparty for the credit default swap market.
It is not yet clear what form a New York Fed-backed central counterparty might take, although a number of initiatives are underway to create a clearing house for swaps.
According to CNBC ‘s Charlie Gasparino it could be organized through the Intercontinental Exchange [ICE
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] and / or the Chicago Mercantile Exchange which "can be operationally ready to clear CDS in a few weeks," according to a spokesperson.
“And I think that’s why the market saw a pop in the CME [CME
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] on Monday,” concludes Najarian
- Your First Move For Monday November 16th
- Web Extra: Where Will The Next Bull Come From?
- Burned by Yahoo!, Disney and More
- The Latest Picks That Paid – Friday November 13th
- Pops & Drops: Dow Chemical, Macy's...
- Chartology – Can Stocks Break Above 1100?
- Fast Action: Using Options To Play Housing Bottom
- Bold Call Of The Day – Microsoft
- Hold 'Em Or Fold 'Em
- Off The Record w/ Charlie Gasparino: Bank of America
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Trader disclosure: On Oct.6, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (UUP), (MSFT), (WMT), (MCD), (BNI); Pete Najarian Owns (AAPL) And (AAPL) Puts; Pete Najarian Owns (IYR) Put Spread; Pete Najarian Owns (MS) And (MS) Puts; Pete Najarian Owns (RF) And Is Short (RF) Calls; Pete Najarian Owns (GS) Call Spread, (RIMM) Call Spread, (WB) Call Spread, (XLF) Call Spread, (NCC) Call Spread; Pete Najarian Owns (BIIB) Calls; Finerman Owns (GS); Finerman's Firm Owns (MDY), (SPY), (IWM), (MO), (JNJ), (MSFT), (DEO); Finerman's Firm Is Short (BBT), (COF), (IYR), (IJR), (USO), (SPG)
Jon Najarian Owns (CME), (CME) Calls, (CME) Puts; Jon Najarian Owns A CBOE Seat; Jon Najarian Owns (NYX); Jon Najarian Owns (NDAQ)
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