Monday, October 13, 2008

Statement 133

It appears that the wizard-accounts have been working quietly, as always, to shine light where it is much needed, at least for investors.

Regulators need their own approach.

Policy makers still need to think of the larger issues and consider how to make changes, without scaring the hell out of this sensitive part of the market.

July 6, 2008

The accounting board proposal would cover sellers of CDSs, the entities that act as insurers. They would have to disclose such details as the nature and term of the credit derivative, the reason it was entered into and the current status of its payment and performance risk.

In addition, the seller would provide the amount of future payments it might be required to make, the fair value of the derivative and whether there are provisions that would allow the seller to recover money or assets from third parties to pay for the insurance coverage it has written.

They are also after clearing up the "mini banks", also know as qualified special purpose entities (QSPEs or "Q's"), that got set-up off balance sheet, even in the post-Enron era.

If you have written a credit derivative to support something such a vehicle, that would seem to lessen the likelihood that the vehicle would "qualify". It does appear that there is too much "recourse", right?

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