Roger

"I believe I specifically said that moving to an exchange would not solve all the problems. That said, i do think it goes a long way towards addressing what is a severely broken market. As for the first point, I have been clamoring for all OTC derivatives to be moved to exchanges for a long time, so no disagreement there. As for the second paper, the socialization of losses would be far lower in light of heightened transparency and better collateral management than under the current regime. So I fundamentally disagree. I think it is a "forest for the trees" issue, and that the value of a transparent, vibrant, exchange-based CDS market far outweighs these costs." - Roger

"RD, you raise an extremely important point and I agree. Much of the noise and hype is obfuscating the real issue, that we should be prepared to let institutions fail, with the losses borne by their stock and bond holders and counterparties who were ill-protected. Whether this means limiting the gross size of firms or having more strict capital and leverage guidelines I'm not sure, but this is among the most important issues to be tackled in the wake of the market meltdown. Thanks for your thoughtful comment." - Roger

"EM, pretty much agree with your comment. My position is from the vantage point of informational value and arbitrage, not leveraged speculation. I do think it is possible to have a valuable, vibrant, safe CDS market. I think it is worth the effort and that Einhorn's position is ultimately ill-founded." - Roger

"FU, a. I'm not on Wall Street b. You have no idea what innovation means. You are mixing up innovation with bad behavior, plenty of which happens in the absence of new product development or purported "innovation," e.g. insider trading, fraudulent mortgage originations, etc. I hope people who pen jerky, hostile, poorly thought out comments rot." - Roger

"I fundamentally agree with you as well as with Paul Kedrosky, who makes a similar point. This position is a far cry from Einhorn's blanket ban, however. My post is not in support of the current OTC CDS construct with leveraged speculation, but with an exchange basis that can be appropriately collateralized and managed. Thanks for the comment." - Roger

"If the markets were completely "free," meaning unbridled, unregulated competition in the Adam Smith sense, then retail would be toast. It is only because of regulation to address externalities (such as the massive divergence in power between institutions and retail) that retail has seen its lot in life improve dramatically. So your statement IMHO lacks the texture and depth necessary to really address what is going on here." - Roger

"If the markets were completely "free," meaning unbridled, unregulated competition in the Adam Smith sense, then retail would be toast. It is only because of regulation to address externalities (such as the massive divergence in power between institutions and retail) that retail has seen its lot in life improve dramatically. So your statement IMHO lacks the texture and depth necessary to really address what is going on here." - Roger