Possible CDS regulation may stamp out liquidity, strategist says

By Aaron Hochman-Zimmerman

New York, Sept. 26 - The possibility of new regulation on the heels of the proposed federal bailout package may choke off liquidity in the credit default swaps market, a debt strategist told Prospect News.

The possible $700 billion plan proposed by Treasury secretary Henry Paulson and Federal Reserve chairman Ben Bernanke has become highly politicized.

"There's also a worry that one of the more liquid instruments, CDS, is going to be regulated out of its liquidity," the strategist said.

Many feel that the credit crisis was created by a lack of regulation and the pressure to regulate has weighed heavily on lawmakers.

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