George Soros, the Chairman of Soros Fund Management, has called for credit default swaps to be banned, and that other derivatives should be as strictly regulated as stocks.
Writing in the Financial Times, Soros stated that: Custom-made derivatives serve to improve the profit margin of the financial engineers designing them. In the case of CDS, Soros used the recent bankruptcies of AbitibiBowater and General Motors as examples where bondholders owning CDS and stood to gain more by bankruptcy than by reorganization.
Soros has been particularly toxic about derivatives of late. In a recent meeting of the Institute of International Finance, Soros concluded, “CDS are instruments of destruction which ought to be outlawed.”