From that Communist Rag The Financial Times

Wolfgang Münchau proposes an outright ban on naked credit default swaps: (CDS)

I generally do not like to propose bans. But I cannot understand why we are still allowing the trade in credit default swaps without ownership of the underlying securities. Especially in the eurozone, currently subject to a series of speculative attacks, a generalised ban on so-called naked CDSs should be a no-brainer.

Naked CDSs are the instrument of choice for those who take large bets against European governments, most recently in Greece. Ben Bernanke, the chairman of the Federal Reserve, said last week that the Fed was investigating “a number of questions relating to Goldman Sachs and other companies in their derivatives arrangements with Greece”. Using CDSs to destabilise a government was “counter-productive”, he said. Unfortunately, it is legal.

As I have noted for some time, the Credit Default Swap is insurance, and there is a very good reason that the British Parliament passed the Marine Insurance Act of 1746, which required, "anyone seeking to collect on an insurance contract to have an interest in the continued existence of the insured property," as well as, "precluding a buyer from insuring property for more than it’s worth."

This should not be SEC slap on the wrist stuff. This should be illegal unenforceable contracts, and you go to jail stuff.