NY Fed to hold meeting on derivatives with banks

Next week, the Federal Reserve Bank of New York will meet with several top Wall Street firms to discuss credit derivatives. This market has grown rapidly in recent years and there are fears that Wall Street’s paper work is very far behind.

The Counterparty Risk Management Policy Group recently released a study which highlighted the problem of Wall Street’s growing back log. Alan Greenspan has praised credit derivatives as a good way of controlling risk. The difficulty is that hedge funds have moved into this market. With the rapid trading, no one is sure who owes what to whom. In fact, what’s left of Enron and Citigroup are currently in court fighting over a credit derivative. My guess is that we’re going to hear more about this issue in the next few months.

Posted by Eddy Elfenbein on September 7th, 2005 at 12:52 pm

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