“The first thing that needs to happen is the very first thing that should have happened a year and a half, two years ago. When Bear went down, the Treasury should have instantly acquired powers of receivership. So if Lehman fails, it doesn’t fail the way it did. It goes into receivership by Treasury. Shareholders and bondholders are wiped out, but other creditors, like with credit default swaps, aren’t wiped out. The second thing that’s needed is that if you had to have reserve capital against credit default swaps, like you do with insurance, the market would be largely shut down because it wouldn’t be profitable.”
To catch the entirety of Michael Lewis’ Interrogation, out in ai5000 Magazine in early April, click here.
aiCIO Editorial Staff