"60 Minutes" this past Sunday devoted its lead segment–"The Bet That Blew Up Wall Street"–to an indictment of how "casino capitalism" and a negligent Congress allowed unregulated trading in credit default swaps to trample our financial system in a stampede of blind greed, with AIG the poster child for all that went wrong.
New York Insurance Superintendent Eric Dinallo got plenty of face time in the devastating 12-minute segment about CDS derivatives, which CBS noted that Warren Buffet once called "financial weapons of mass destruction." (Click here to read the full transcript or view the video.)
One major point I learned from the broadcast, much to my chagrin, was how state regulatory barriers had been firmly in place to prevent such risky business. But Congress, in an act of pure folly and negligence, not only stripped away federal oversight, but prohibited the states from taking any action on their own. That left myopic traders like those at AIG free to go deeper and deeper into a credit default swap quagmire, the depths of which we still do not know for sure!
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