Follow-up re credit default swaps (CDSes)

My favorite economics and business show, Marketplace on NPR, has a great blog video on the continuing financial crisis,
http://www.publicradio.org/columns/marketplace/offair/2008/10/untangling_credit_default_swap.html

They don't say anything about any criminal behavior but I'm sure that's to-follow. Instead, they seem to be saying that the issue is the lack of reporting requirements, i.e., companies can essentially be gambling enormous sums of money but not need to tell investors that they're doing it. Obviously, a company that reports 'good' earnings but also has to admit that they're doing a lot of CDS 'gambling' won't be viewed as favorably by the market.

Ultimately, I still stand by my earlier post (April 2008) about "The Credit Default Swap scam" -- there's got to be a lot of fraud taking place, same as in other aspects of high finance!

The "Credit Default Swap" scam

A quick follow-up to my previous comment about 'credit default swaps' being a scam. I recently came across these 2 excellent and very detailed explanations of the issue:

Longer, more detailed,
http://seekingalpha.com/article/73060-why-wall-st-needed-credit-default-swaps

Shorter, sweeter,
http://www.voiceofsandiego.org/articles/2008/04/28/toscano/843creditswaps011808.txt

Basically, these things are a kind of fake insurance but which the government accepts as real insurance. Because of a loophole in the accounting laws (e.g. GAAP) companies can decline to state their financial losses. "Because it's insured!" It's like buying PMI for your mortgage only your 'insurer' is your brother-in-law who never expects to have to cover your mortgage and doesn't have any capital reserves either (like a real insurer would).