Regulatory Outreach for Student Education

Engaging Students in the Debate Over Financial Services Reform

Today’s debate over regulatory reform is a watershed activity in the careers of financial industry professionals. Years ago, similar debates over mandated pre-funding of pension liabilities (ERISA) and the reunification of investment banking with commercial banking (Glass Steagall's repeal) changed the direction of financial market evolution. Opinions may differ on the merits of those changes, but no one disputes their significance.

Without question, college students and young professionals should be well-versed in the issues involved in today's debate. The Regulatory Outreach for Student Education (ROSE) program is the Center's way to give top students, tomorrow's business and finance leaders, opportunities to experience the financial regulatory process up-close.  The ROSE program is designed to put students in touch with the regulators, policy-makers, and industry leaders who are currently shaping the financial regulatory landscape.  We then challenge them to research and articulate their own positions on the most intriguing and interesting issues.  

ROSE Program Blog

Tuesday, November 29, 2011

Widening CDS Spreads Worry Global Financial Markets


Author: David Schwartz J.D. CPA David Schwartz J.D. CPA

Over the past few months, spreads for credit default swaps (CDS) have widened quite dramatically.  This is true for European sovereign CDSs as well as financial institutions, including those for US banks.  For example, in September, the five-year CDS spread for Bank of America widened to 228 basis points from 297, and Citigroup's hit 221, up from 204. Goldman's was 227, up from 206.  


Some experts believe that these widening spreads are due principally to concerns about the sovereign crisis in Europe, while others believe the phenomenon is a result of continuing mortgage related litigation in the US. Regardless of why CDS spreads are widening, it is critical that issuers and distributors of structured products monitor these developments. These widening CDS spreads are a clear sign of stress on banks, and that the cost of protecting financial institution and government debt against default is steadily rising, causing worry across the global financial markets.
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