Credit Derivatives Still Not Spawn of the Devil

Let me offer an analysis of much of the media coverage of credit derivatives recently.

"Credit derivatives traders eat babies. Now XYZ event will tip the financial system further into chaos thanks to these dastardly instruments..."

(XYZ = Fannie/Freddie credit event, Lehman credit event, ...)

"On the eve of the auction for XYZ we spotlight the satanic unregulated* credit derivatives market..."

[The event happens. Settlement is orderly.]

"XYZ event was OK, we suppose, but the NEXT event will truly cause the end of the world thanks to the inexorable evil of credit derivatives."

The DTCC has an antidote. I doubt many bloggers or mainstream journalists will read it.

* Where by 'unregulated' we mean of course 'unregulated apart from the regulation'.