Credit Default Swaps Markets May Face Challenge

The NY Times had an article about the market for credit default swaps, noting that it's now twice the size of the entire U.S. stock market. That market is $45.5 trillion now, having grown from $900B in seven years, and it compares with a $21.9 trillion stock market. Credit default swaps are, in a nutshell, insurance policies against default by corporations on their debts. They are largely unregulated, and some analysts worry that if companies start defaulting on bonds due to a poor economy, the financial markets could be in for some big trouble. Worse yet, according to this article, the swaps are often sold, meaning it may be harder to locate the party who has to pay on the swap if it's called upon.