July 29, 2010
Since swaps are defined as insurance against an event, and most states forbid the writing of an insurance contract unless an insurable interest exists, swaps and other contracts should only be allowed to protect someone with an actual financial risk in the transaction. The purchase or sale of swaps to uninvolved parties should be prohibited. If this had been done already, there would have been no AIG / Goldman crisis, there would have only been CMBS contracts and ofsetting swaps to match. This needs to be the case. No insurable interest, No swap. Simple fix.