Congress should let state officials regulate credit default swaps because they are a "species of insurance," a New York lawmaker speaking for the National Conference of Insurance Legislators contends.
The comments by New York Assemblyman Joseph Morelle, D-Irondequoit, on behalf of NCOIL came during a hearing on a federal bill that would require most over-the-counter derivatives to be overseen by federally regulated clearinghouses, while banning "naked" credit default swaps–traded by those who do not own the underlying security.
If Congress concludes that credit default swaps are "a species of insurance–and I would strongly suggest that they are–then authority in relation to CDS must accrue to the states," Mr. Morelle said in his testimony on the bill introduced by Rep. Collin Peterson, D-Minn., chair of the House Agriculture Committee.
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