Speculating in CDS is a good thing

Hahahahaha. Ahem. From Bloomberg:

The legislation Frank plans to release next week might disrupt the flow of capital to companies by making it costlier for investors to hedge their stakes, said Robert Pickel, chief executive officer of the International Swaps and Derivatives Association, a New York-based industry group that sets rules and guidelines for the market.

‘Liquidity and Depth’

“Having people who are in there speculating adds liquidity and depth to the market so that anybody who is a pure hedger, they can tap that market and know they have a deep and liquid market to turn to,” Pickel said in an interview yesterday.

Costlier for investors to hedge their stakes! Costlier? Does this moron mean costlier than the worlds financial system melting down?

You know, like a deep and liquid market back stopped by you & me the tax payers. Anyone remember Bear Sterns, Lehman Bros, AIG, Merril Lynch, yes they too were history without their private bailout, et al.

CDS at wikipedia.

In case you aren't aware of the problems CDS has caused, one example is how AIG wrote many, many, many of them. Basically without collateral backing them up, collecting premiums and "insuring" far more than they could ever dream of covering.

Sort of like you collecting premiums on insuring New Orleans in the event of a disaster without any way to pay the bill. Some believe this is fraud plan and simple.