Credit Default Swaps
UN Economic Crisis Contingency Discussions

23 June 2011

In 2008, leaders faced a collapse of the global financial system in the largest economic crisis since the Great Depression.  The trigger for this crisis was unregulated OTC derivatives, specifically Credit Default Swaps.  Instead of containment, these variables were ignored and an emergency strategic plan was advanced by Central Banks to flood the global financial system with liquidity.  Instead of targeting the victims who were devastated by financial crimes in unregulated markets, these emergency funds flowed to investment banks who exploited these resources for speculative trading to leverage the stock and commodities market.  The result of this crisis response plan was a deeper humanitarian emergency, oil shock and food crisis that continues to spiral out of control.

Today, we have a vast majority of 192 UN member countries in technical insolvency, without a legal mechanism to assist bankruptcy protection, restructure or debt relief. Why?  Unregulated Credit Default Swaps or insurance policies against default, once again threaten to collapse the global financial system. How big is the problem?  Leaders in panic tell us, they don't know, because the instruments are unregulated and exist in shadow markets.  

A full-scale restructuring of Greek debt would have "completely uncontrollable" effects on financial markets and could threaten other countries' stability, German Chancellor Angela Merkel warned on Wednesday.

Those credit default swaps have a "significantly higher" face value than the debt itself, and the consequences of them being called on can't be foreseen, she said.

"Nobody around the globe knows exactly who holds those papers and what it means if they come due," Merkel told a meeting of the German parliament's European affairs committee. She said it was also unclear "who will have to pay how much and who will need fresh capital in what way." -- Merkel warns against Greek debt restructuring: Bloomberg,  22 June 2011.

Banks are exposed to government bonds, while losses could also spread through derivatives such as credit default swaps, the board said in a statement. Credit-default swaps insure against bond default, so any restructuring could trigger losses for the companies issuing the swaps. -- Trichet: Financial crisis is code 'red': Bloomberg, 22 June 2011.

Perhaps, it is time to (1) shut down the unregulated CDS and OTC derivatives market to prevent another systemic collapse of the global financial system, (2) establish a unified global strategic plan for restructure and (3) coordinate a debt relief strategy proportional to the systemic damage caused by these unregulated instruments that crashed the markets in 2008.


Commentary - The World Held Hostage by Credit Default Swaps: IRA Staff, Risk Center, 21 June 2011.
Url: http://www.riskcenter.com/story.php?id=99912829


19 June 2011

IBAHRI: ICC - Fraud is Fraud: Credit Default Swaps - 60 Minutes

Today in 2011, world markets face another systemic market collapse due to the unregulated OTC derivatives market, or financial weapons of mass destruction that caused the global market crash in 2008. This time the trigger of credit default swaps encompasses default or legal efforts by countries to restructure, to address the damage and distortions caused by these unregulated instruments from 1999-2011.

Unregulated speculative trading of OTC derivatives and financial crimes (1999-2011) are being viewed in the context of destabilization of UN member countries and deaths attributed to the associated humanitarian emergency, oil shock and food crisis.  To date, not one international financial body has been able to contain the cause of this crisis, that today impacts 192 UN member countries.  It is our hope that the International Criminal Court will take on this challenge to provide jurisdictional guidance to UN member countries, so we can progress with a unified containment strategy.  With this call, is not an appeal for emergency loans, but for debt relief proportional to the damage associated with these instruments described in the following 60 minutes documentary segment as Financial WMD's:


16 June 2011

CDS Insolvency Discussion - Appeal for Nullification of Contracts

Earlier today, the CDS Insolvency discussion was expanded to UN and intergovernmental contingency planning bodies.  I would appreciate commentary on the request for judicial nullification of unregulated OTC derivatives contracts, on the basis of international criminal investigations associated with fraud in the OTC derivatives market.  It appears that this request could apply to all unregulated instruments that present a systemic risk to the global financial system.

I believe there is consensus that we must return to market fundamentals, with market access to OTC derivatives, only on the condition of comprehensive regulatory oversight and accountancy review.


16 June 2011

The following international economic emergency contingency discussion might be of interest.  The unregulated OTC derivatives market, that caused the systemic collapse of the global financial system in 2008, remains unregulated. This memo focuses on legal analysis of the unregulated CDS market and and potential need for neutralization of these instruments in a systemic global economic emergency.  By the time this is read outside of the UN legal framework, we hope a mechanism is in place to address this unregulated, unfunded focus of geosystemic risk.

Stephen M. Apatow
Director, Global infrastructure Analysis and Contingency Planning
Humanitarian Resource Institute
International Disaster Information Network
Year 2000 Conversion Initiative
Url: http://www.humanitarian.net/contingency.html

cc: International Bar Association


14 June 2011

From: Stephen M. Apatow
Founder, Director of Research & Development
Humanitarian Resource Institute
Humanitarian University Consortium Graduate Studies
Center for Medicine, Veterinary Medicine & Law
Phone: 203-668-0282
Email: s.m.apatow@humanitarian.net
Internet: www.humanitarian.net

HRI:UNArts: Humanitarian Intervention Initiative
Url: www.unarts.org/H-II

Subject: CDS Insolvency - Restructure Viewed As Only Solution

The global humanitarian emergency, oil shock and food crisis continues to devastate UN member countries.  The key variable limiting the call for restructure, to address the systemic damage and market distortions attributed to the unregulated OTC derivatives market, are unregulated credit default swap (CDS) derivatives.

Recent emergency contingency discussions have brought to light the legal substance of unfunded credit default swaps, by financial institutions that lack the capacity to meet the obligations of the instruments, that would be triggered in the event of a large scale shock or default.  In short CDS insolvency, based on a stress test of interrelated financial institutions, demands a comprehensive re-examination of legitimacy of these instruments, that are today viewed as the variable that would trigger a systemic collapse of global financial markets. 

Multiple appeals have been presented for a unified global strategic plan, to assist UN member countries with restructure and debt relief, that would address the distortions caused by the unregulated OTC derivatives market from 1999-2011. To date, these efforts have been unsuccessful.  

Looking forward to feedback on these discussion points.

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