Afternoon:
14°c
US launches swaps probe
14.07.09
The US Justice Department has opened a probe into the market for credit-default swaps, it emerged today.
CDS's - contracts that protect against or speculate on corporate defaults by paying the buyer the face value of a bond or loan if a company fails to meet its debt agreements - ballooned almost 100-fold in seven years to $62 trillion by end-2007.
Trading in the contracts is unregulated, which made it difficult for governments to assess how connected banks had become following the failure of Lehman Brothers. News of the investigation came from Markit Group, the data provider majority-owned by Wall Street's largest banks. A Markit spokesman said: "We will work with the Department to provide any information requested of us."
