{"id":256,"date":"2008-09-17T11:17:40","date_gmt":"2008-09-17T19:17:40","guid":{"rendered":"https:\/\/bayesianinvestor.com\/blog\/index.php\/2008\/09\/17\/moral-hazard-with-credit-default-swaps\/"},"modified":"2010-06-13T18:33:41","modified_gmt":"2010-06-14T02:33:41","slug":"moral-hazard-with-credit-default-swaps","status":"publish","type":"post","link":"https:\/\/bayesianinvestor.com\/blog\/index.php\/2008\/09\/17\/moral-hazard-with-credit-default-swaps\/","title":{"rendered":"Moral Hazard with Credit Default Swaps"},"content":{"rendered":"<p><a href=\"http:\/\/en.wikipedia.org\/wiki\/Charlie_Munger\">Charlie Munger<\/a> in the August 31, 2008 issue of <a href=\"http:\/\/www.oid.com\">Outstanding Investor Digest<\/a>:<\/p>\n<blockquote><p>\nLet&#8217;s say you&#8217;re insuring against the outcome that people will lose money on a $100 million bond issue, and the credit default swaps, instead of amounting to $100 million, amount to $3 <i>billion<\/i>. Now you&#8217;ve got people with $3 billion worth of contracts that really have a big incentive in having somebody fail. And they may manipulate in some fraudulent or extreme way to cause a default in order to make the big collection.\n<\/p><\/blockquote>\n<p>There doesn&#8217;t seem to be enough transparency in financial systems to figure out whether this concern is relevant to this week&#8217;s panic.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Charlie Munger in the August 31, 2008 issue of Outstanding Investor Digest: Let&#8217;s say you&#8217;re insuring against the outcome that people will lose money on a $100 million bond issue, and the credit default swaps, instead of amounting to $100 million, amount to $3 billion. Now you&#8217;ve got people with $3 billion worth of contracts [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[18],"tags":[],"class_list":["post-256","post","type-post","status-publish","format-standard","hentry","category-investing"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p80O1l-48","_links":{"self":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/256","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=256"}],"version-history":[{"count":1,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/256\/revisions"}],"predecessor-version":[{"id":616,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/256\/revisions\/616"}],"wp:attachment":[{"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=256"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=256"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bayesianinvestor.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=256"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}