Congress will likely move next year to require companies that insure credit default swaps–such as American International Group–to at least partially reserve against potential losses, according to Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee.
In comments at the Consumer Federation of America's recent annual conference, Rep. Frank characterized AIG's decision to guarantee against losses on mortgage-backed securities backed by subprime loans at the holding company level as "unregulated speculation."
He said Congress is likely to pass legislation curbing speculation on CDS trading partly by imposing "some reserving authority" on the unit selling such guarantees. "Look at AIG," he said, in citing how Congress will move to place curbs on risk-taking by financial institutions.
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