Credit Default Swaps - or I'm betting you lose your house...
Back in the 90's a new type of "derivative" became available called the Credit Default Swap. I'm not sure why it was originally invented, but at the time it wasn't used that much. The idea is that you take out an insurance policy on someone else's debt. Now this is a great and all if you're the one paying that is being paid back for the doubt,
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If you spend a little money on advertising and such, you can convince people that it's their birthright to own a home no matter how little income or collateral they have. Then, you lobby the government to pass legislation encouraging (or even requiring) lenders to issue mortgages to low-income folks who have no business buying a home. Not only do a lot of bad mortgages get inked, but housing prices will be inflated due to all the extra demand from the new buyers. This will turn a mere market correction into a total collapse, making your default swaps even more valuable and making you very, very wealthy. Brilliant!
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