October 07, 2008
Unrelated Underrated News Bits: CCP for CDS and Mandatory Mortgage Modification
Posted by Anna Gelpern

I get a lot of questions about future regulation of the $60+ trillion CDS world in the wake of the crisis. (Here is Sunday's 60 Minutes backgrounder featuring Frank Partnoy.)  Bear, AIG and Lehman were major shocks that reopened some long-closed debates on overseeing the OTC derivatives market, including the ten-year-old truce on regulating swaps.  Two options come up with some frequency:  Central Counterparty Clearing and chasing more or most CDS contracts onto regulated exchanges.  Monday's meeting at the New York Fed was an important step on the path to the former.  For policy views and design preferences, see this 2006 speech by Fed Gov. Kroszner.

...

The $8.4 Countrywide settlement is in the press.  (See here the NYT article and Angie Littwin's post on Credit Slips.)  This quote from Illinois AG Lisa Madigan caught my eye:  "We have created the first comprehensive, mandatory loan modification program with the largest loan servicer in the country ..."  So far, all the modification efforts -- legislative and executive -- have been voluntary and piecemeal.  Devil in the details, forthcoming.

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