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"It also sparked growth in the unregulated credit derivatives trades that bet on defaults of corporations or loans, which became the main ingredient in the hot new Wall Street financial gumbo. Credit derivatives were a type of insurance contract written against not just one corporation or loan but on investments that scarfed up bunches of subprime loans (junk) and stuffed them into the unregulated CDOs that imploded and hastened the greater lending crisis."
Credit default swaps became the most widely traded credit derivative. As unregulated insurance bets between two parties on whether or not a company's bonds would default, financial writer Ellen Brown asked in her April 11, 2008 article titled, "Credit Default Swaps: Evolving Financial Meltdown and Derivative Disaster Du Jour:"
What if "the smartest guys in the room designed their credit default swaps (but) forgot to ask one thing - what if the parties on the other side of the bet don't have the money to pay up?" In late 2007, when the financial crisis hit, they didn't, causing a "supersized bubble" to deflate.
New Deal reforms were enacted to prevent it. Deregulatory madness made it inevitable and the subsequent global economic fallout that continues - compounded by what Danny Schechter explained in his book, titled "The Crime of Our Time," calling the financial collapse "a crime story (involving) high status white-collar crooks." Their schemes included:
-- "Fraud and control frauds;
-- Insider trading;
-- Theft and conspiracy;
-- Misrepresentation;
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