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The problem is the nature of the speculation.  As I commented in Jerome's diary, they wrote the swaps like insurance policies and then handled them like securities, which just can't work.  It's too late to start handling them like insurance policies, so the banks need to stop booking them like insurance policies.  That these CDSes satisfy the regulatory requirements only shows how weak the Basel II framework is.
by rifek on Mon Mar 23rd, 2009 at 09:04:27 AM EST
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