According to a Bloomberg article posted today, Moody’s has come to the conclusion that credit default swaps tied to Berkshire Hathaway debt significantly overstate underlying risks. Moody’s, which downgraded Berkshire Hathaway’s credit rating in April, makes some observations that seem rather obvious to anyone who has been following Berkshire’s financial condition in recent years. Read this article for more details.
There has been much debate in recent days regarding whether the market for Credit Default Swaps (CDS) should be more tightly regulated. Let’s take a look at the nature of credit default swaps and whether arguments for tighter regulation have merit.