Credit default swaps partial cause of bankruptcies

Bondholders who bought credit default swaps may benefit more if the company goes bankrupt. That’s because they will get paid by whoever sold them the CDS. Thus, they probably would not be interested in negotiating terms or helping the company (and its employees) survive.

In this viciously predatory system, the health of the company isn’t even a matter for consideration. Ain’t capitalism grand?

One comment

  1. When a consumer owes a bank money and gets delinquent, frequently the bank benefits more if the consumer goes bankrupt than if they pay the money back at a slower rate. Thus some creditors will try to force the consumer into bankruptcy.

    So this is nothing new– just the shoe on the other foot.

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