Washington, D.C. —- U.S. Rep. Bob Etheridge (D-Lillington) is in Europe this week to examine ways to regulate credit default swaps, an unregulated industry that may have contributed to the international financial crisis.
Etheridge will visit London, Brussels and Frankfurt and will meet with European officials to examine how they regulate the credit default swap industry. Etheridge chairs the Congressional subcommittee with jurisdiction over credit default swaps.
Credit default swaps have grown from a $100 billion market to an almost $60 trillion market in the last decade and may have been at the root of the international financial crisis. Credit default swaps are like insurance policies bought by investors to protect against an investment such as a corporate bond losing all value if the company falls apart. But because the markets are unregulated, there is no guarantee that sellers of swaps would pay their obligations, thus causing financial instability to spread and companies to fail.
Etheridge is the Chair of the Subcommittee on General Farm Commodities and Risk Management of the House Agriculture Committee. The subcommittee has jurisdiction over the Commodity Futures Trading Commission, which has the authority to oversee credit derivatives.
Also on the trip with Etheridge are Agriculture Committee Chairman Collin Peterson and committee member Rep. Jim Marshall. The Agriculture Committee held two hearings in October and November to examine the role credit default swaps have played in the financial crisis and to determine if new legislation is needed.