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Real Estate > Piggington's Econo-Almanac

Credit Default Swap Problems

Rich Toscano | Fri, 01/18/2008 - 1:37am |  Add a comment

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Back in November 2006, I wrote a long-ish piece about credit default swaps. These financial instruments, known for short as CDSs, basically function as insurance policies against borrowers defaulting on loans. In (very) brief, the premise of the article was that some CDS issuers, which we can think of as insurers, probably didn&039;t have enough money to cover the losses once homeowners started defaulting en masse. Once this came to light, I wrote at the time, it could cause a tightening of credit for San Diego&039;s leverage-happy homebuying public.

I never really followed up because the credit tightening ended up being triggered by problems with a different type of credit derivative, the collateralized debt obligation.

read more at voiceofsandiego.org

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