2008-10-26 The Bet That Blew Up Wall Street

2008-10-26 Steve Kroft CBS \2008 financial meltdown\Bill Clinton helped cause the 2008 financial meltdown\credit derivatives http://www.cbsnews.com/stories/2008/10/26/60minutes/main4546199.shtml The Bet That Blew Up Wall Street The Bet That Blew Up Wall Street  Anyone with more than a casual interest in why their 401(k) has tanked over the past year knows that it's because of the global credit crisis. It was triggered by the collapse of the housing market in the United States and magnified worldwide by the sale of complicated investments that Warren Buffett once labeled financial weapons of mass destruction.

They are called credit derivatives or credit default swaps.

As correspondent Steve Kroft first reported last fall, they are essentially side bets on the performance of the U.S. mortgage markets and some of the biggest financial institutions in the world - a form of legalized gambling that allows you to wager on financial outcomes without ever having to actually buy the stocks and bonds and mortgages.

It would have been illegal during most of the 20th century under the gaming laws, but in 2000, Congress gave Wall Street an exemption and it has turned out to be a very bad idea.

&ldquo;...credit derivatives ... are essentially side bets ... a form of legalized gambling... It would have been illegal during most of the 20th century under the gaming laws, but in 2000, Congress gave Wall Street an exemption and it has turned out to be a very bad idea.&rdquo;   