Blythe Masters Quotes

Derivatives in and of themselves are not evil. There's nothing evil about how they're traded, how they're accounted for, and how they're financed, like any other financial instrument, if done properly.

I do believe CDSs [credit default swaps] have been miscast, much as poor workmen tend to blame their tools.

Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.

Over and over again, financial experts and wonkish talking heads endeavor to explain these mysterious, 'toxic' financial instruments to us lay folk. Over and over, they ignobly fail, because we all know that no one understands credit default obligations and derivatives, except perhaps Mr. Buffett and the computers who created them.

A.I.G. was even larger than Lehman, with a substantial presence in derivatives and debt markets, as well as in insurance markets.

If nobody can sell mortgage-backed securities based on trillions of dollars of unpayable instruments, there's a lot less risk in the overall system.

Other People’s Money and How the Bankers Use It

Credit default swaps were nothing more than souped up versions of things that have been around for a long time like soy bean futures

Banks are employing risky derivatives strategies to goose up returns….the interbank market could freeze up, and one could well have a full blown financial crisis.

I think the most important thing to understand about credit derivatives and their use at JPMorgan is they served a number of different purposes. First and foremost, they were a tool which initially was seen as being useful in managing the bank's own risk management challenges.

Credit-default swaps remedied the problem of open-ended risk for me. If I bought a credit-default swap, my downside was defined and certain, and the upside was many multiples of it.

You can't explain collateralized debt obligation in a novel - it's too draggy.

I think what we need is better understanding of how to do risk analysis of a CDO, but that they still can perform a very valuable function because they can aggregate these risks and pass them around so that mortgages or other kinds of loans can be packaged and sold to investors all over the world, who in most times, would justify a small amount of each one.

There are a lot of ways that investment banking models work, but these risks are not internalized by the people that are taking them.

Credit-default swaps, I think, have serious problems associated with them.

What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so.

I think the credit default swaps can take the place of the rating agencies who really have missed the ball in this procedure and are quite conflicted by the way the ratings are paid for. So, I would like to see credit default swaps become an evermore important way of understanding credit risk in the economy.

So what is the role that credit default swaps can play in an economy? Well my feeling is that if these things actually will now be traded on either exchanges or some kind of central clearing, they are going to be a very good measure of the credit worthiness of different companies.

Main Street investors, who cannot trade credit default swaps, should not be tempted to trade an instrument with the same risk profile simply because it has been given a different name.

Of course most Americans don't know how A.I.G. brought the world's financial system to near-ruin or what credit-default swaps are. They may not even know what A.I.G. stands for. But Americans do make the connection between their fears about their own jobs and their broad understanding of the A.I.G. debacle.

If we are really serious about preventing another crisis like the 2008 meltdown, we should simply ban complex financial instruments unless they can be unambiguously shown to benefit society in the long run.

The people who did the collateralized mortgage obligations, sold them to pension funds, then sold them short, then bought credit default swap insurance on them, are just amazing. They are a law unto themselves.

We should ban banks from risk-taking because society is going to pay the price.

Ratings agencies are the glue that ostensibly holds the entire financial industry together.

Derivatives are a huge, complex issue.