Right On

Felix Salmon had a nice post today about politicians and their nonsense regarding Greece and credit default swaps. Carolyn Maloney, Chair of Joint Economic Committee, is quoted in the FT:

Ms Maloney compared the use of credit default swaps in the Greek situation to the “activities that brought down American International Group”, referring to the US insurer that collapsed and was bailed out in September 2008. “These reports, if true, are a shocking echo of the financial crisis that faced the US in 2008 – whose reverberations are still being felt today, in the worst recession in decades.”

This is nonsense, as Salmon notes. AIG sold CDS and then could not cover claims, Greece is not selling any CDS, it is the subject of insurance. People are buying insurance against their default. The comparison is daft.

Salmon also points to the German financial watchdog which apparently is worried that German bailout funds will go to speculators, even though the speculators seem to be betting on a Greek default. It is crazy.

But as Salmon notes:

it’s all a big Kabuki, wherein anybody bashing banks in general, and Goldman Sachs in particular, gets automatic political brownie points. And there are no points at all, it seems, for basic financial literacy.