CDSs are, in fact, a species of insurance, and naked swaps are more akin to gaming than insurance since they lack insurable interest.

the goals of this draft bill would be best realized and enacted by the states; whether the CFMA was overbroad in its intent and application

I am pleased to be here today on behalf of NCOIL to discuss draft legislation titled the 'Derivatives Markets Transparency and Accountability Act of 2009.'

I think we agree that a group of states together in either compact or with model legislation would come up with a national standard that could be used.

I just can't imagine the regulatory arbitrage problems that we would have if we broadened this to 50 jurisdictions within the United States.

I certainly don't dispute the fact that credit default swaps play an important role in our financial institutions, but they are insurance, they are a financial guaranty and ought to be treated as such.

I would also say, when the airline industry is mentioned as suffering from this, I expect you will hear from the airline industry that it suffered substantially from the deregulation that it experienced over the last summer.

I believe we do, and the superintendents of the various states together with NAIC, which is their organization, in conjunction with NCOIL would certainly be able to put standards in place that would meet that requirement.

I would just like to note that the argument that naked CDSs, as I would define them, that don't provide any hedge at all but are purely speculative, aren't a tool for risk management since there is no risk on the part of the buyer of the…

Well, thank you Congressman. I just would point out, as I mentioned in my testimony, that if you look at AIG from the perspective of the state-regulated companies, AIG has many state-regulated insurance subsidiaries.

It seems to me that if one institution needs hedging and they go to A and A says sure, I will hedge with you, then A has this risk.