Credit Default Swaps: How Should They Be Regulated?

Abstract:     

With the passage of the Dodd-Frank Financial Reform Act there has been much debate about the effectiveness of this piece of legislation. One of the largest concerns legislators addressed in Dodd-Frank was how the credit default swap market ballooned to astronomical proportions and how these financial derivatives were abused by "Too Big To Fail" financial institutions. This article examines how credit default swaps played a role in the financial crisis and addresses the debate as to whether or not credit default swaps are in fact a form of insurance and the effectiveness of Dodd-Frank in addressing the problems created by the interconnectedness and abuse of the financial instrument. The article concludes by offering suggestions for legislators to consider and recommends amending the current Dodd-Frank Financial Reform Act.

Number of Pages in PDF File: 39