As reported by the Wall Street Journal (here), the Antitrust Division of the Department of Justice is investigating potential violations in the Credit Default Swap market, asking for information from Markit Group Holdings Ltd. Markit was a key player in the explosion of the CDS market from virtually nothing into the $38 trillion market that it became. Although not an exchange, Markit Group collected information from banks and brokers and published prices for various swaps.
So who is Markit Group Holdings? Well, its largest shareholders include many of the large investment banks on Wall Street, including J.P. Morgan, Goldman Sachs, Citigroup, Deutsche Bank, Bank of America, Barclays, UBS, and Morgan Stanley. Although the article is scant on details of the potential antitrust violations DOJ is investigating, the fact that all of the large banks banded together and created a company that basically set the prices of such a large market seems at least create the opportunity for manipulation of the market, manipulation of pricing, and the ability to keep any other company interested in competing with Markit Group frozen out of the business.
(photo courtesy of freefoto.com)
Why didn't DOJ catch onto this earlier? This so obviously was an attempt at monopoly. Also knowing that such groups as Markit were publishing bogus pricing for credit swaps, coupled with the fact that many mortgage backed securities were getting much higher bond ratings than most should have received, its no wonder that inter-trading between banks ground to a halt and there was so little liquidity among lenders as the real estate market tanked. http://www.modificationzoom.com
Posted by: Loan Modification Zoom | July 17, 2009 at 02:46 PM