Jon Stewart and Samantha Bee Take Down the Financial Press

On a number of occasions, I have noted that it has been illegal to take out insurance on something in which one does not have an interest in its continued existence.

So, it's illegal to take out a policy on your neighbor's house, because otherwise, you would have an interested in burning it down.

This problem was first addressed, in the UK at least in the by the Marine Insurance Act of 1746.

The proximate cause was people who would buy insurance on a merchant ship, and then leak the manifests and schedules to the French, who were at war with the British at the time, and they would collect the insurance payouts.

It has been the law for longer then there has been the United States.

Only in the late 1990s, they decided that it did not apply to credit default swaps, and so the ripe-for-abuse "naked" CDS was born.

Well, the Daily Show found a story on Bloomberg about how the private equity firm Blackstone Group purchased a naked CDS on a 3^rd party loan to the Spanish gaming company Codere.

Blackstone then made a loan to Codere that was conditional to their making their making a payment late on the aforementioned 3^rd party loan, which was a "credit event" which netted the investment firm a $15,000,000.00 payout.

What I do not understand how this isn't insurance fraud, except, of course, a CDS isn't insurance, except, of course, that it is.

But besides the Bloomberg article there has been crickets from the financial press, which Jon Stewart and Samantha Bee discussed last night.



Brutal