George Soros: Urges To End CDS Markets

Mr Soros, the Hungarian-born US fund manager, said that the swaps were ‘truly toxic’, grossly distorting risk, encouraging speculation and with the potential bring ruin on financial institutions and companies.

Citing the recent bankruptcy of General Motors in America, Mr Soros said that some bondholders had stood to gain more from bankruptcy than re-organisation as a result of their CDS positions.

“It’s like buying life insurance on someone else’s life and owning a licence to kill him,” he said of the swaps, which pay the buyer face value if a borrower defaults, in exchange for the underlying securities or the cash equivalent.

In remarks to a meeting of international bankers and financiers in Beijing, Mr Soros set out his vision for a new regulatory system for global finance that would require regulators to intervene to stop the kind of credit and asset bubbles which precipitated last year’s banking crisis. Full Story