Skip Navigation
Megan McArdle

Megan McArdle - Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and The Economist. She is currently on leave.
More

Megan was born and raised on the Upper West Side of Manhattan, and yes, she does enjoy her lattes, as well as the occasional extra-dry skim-milk cappuccino. Her checkered work history includes three start-ups, four years as a technology project manager for a boutique consulting firm, a summer as an associate at an investment bank, and a year spent as sort of an executive copy girl for one of the disaster-recovery firms at Ground Zero � all before the age of 30.

While working at Ground Zero, Megan started Live From the WTC, a blog focused on economics, business, and cooking. She may or may not have been the first major economics blogger, depending on whether we are allowed to throw outlying variables such as Brad Delong out of the set. From there it was but a few steps down the slippery slope to freelance journalism. She has worked in various capacities for The Economist, where she wrote about economics and oversaw the founding of Free Exchange, the magazine's economics blog. She has also maintained her own blog, Asymmetrical Information, which moved to The Atlantic, along with its owner, in August 2007.

Megan holds a bachelor's degree in English literature from the University of Pennsylvania and an M.B.A. from the University of Chicago. After a lifetime as a New Yorker, she now resides in northwest Washington, D.C., where she is still trying to figure out what one does with an apartment larger than 400 square feet.
« Previous McArdle | Next McArdle » Email Email Print Print

Why Ban Insider Trading in Credit Default Swaps?

By Megan McArdle

Apr 1 2010, 10:17 AM ET Comment

Felix Salmon has a post on insider trading in credit default swaps that prompts Kevin Drum to say 


 Financial regulatory reform is looking better all the time, isn't it? No serious capital or leverage requirements. A consumer protection agency housed at the Fed and barely worth the paper it's implemented on. And no exchange trading of CDS because the exchanges don't want to do it and Congress probably won't force them to. I don't know about you, but I'm about ready to say we should just scrap the whole thing and admit that we're OK with Wall Street plutocrats continuing to run the country for their own benefit until they destroy the country properly. At least that would have the virtue of honesty.

And by the way: Felix will shoot me for saying this, but I've pretty much come to the conclusion that credit default swaps should simply be banned.

I am willing to entertain the notion that credit default swaps should certainly be banned.  But I'm not sure why we should care about insider trading in them.  The ostensible reason for insider trading bans is that they maintain retail investor faith in the market, by keeping them from getting rooked by unscrupulous dealings.  Believe it or not, there are some arguments against this logic, but assume it's correct.  Why should I care if Morgan Stanley gets taken for a ride by Goldman Sachs?  They're big boys who ought to be able to look out for themselves.

Nor does this pose any sort of systemic risk; the insider trading is done in anticipation of further bond issues in specific firms.  All the insider trading ban will do is maybe keep big financial firms from taking mild losses, and impede price discovery.

I know, I know . . . INSIDER TRADING!!!!  WE ALL KNOW IT'S VERY BAD!!!  But to the extent it's bad, it's bad because it lets the sophisticated and connected take advantage of the innocent.  And after the last year, I think it's hard to argue that any of the big firms who play in this market is particularly . . . innocent.


Presented by

More at The Atlantic

What It Means That Computers Can Tell These Smiles Apart, But You Can't Which Smile Is Fake? (This Computer Knows)
The Controversial German Book Linking the Euro to Holocaust Guilt Holocaust Guilt Is to Blame for the Euro
Obama Needs to Articulate a Second-Term Agenda What Would Obama Do With Four More Years?
Chris Matthews and Newt Gingrich: The Most Entertaining (and Reptile-Centric) Political Interview Ever Gingrich Meets Matthews: A Reptile-Centric Interview
Romney's Plan to Save Higher Ed: Let the Private Sector Handle It Romney's Plan to Save Higher Ed

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.
blog comments powered by Disqus

Correspondents

View All Correspondents

The Biggest Story in Photos

Where in the World? Part 3: A Google Earth Puzzle

May 25, 2012

Subscribe Now

SAVE 59%! 10 issues JUST $2.45 PER COPY

Facebook

Newsletters

Sign up to receive our free newsletters

(sample)

(sample)

(sample)

(sample)

(sample)

(sample)

Megan McArdle
from the Magazine

Why You Can’t Get a Taxi

And how an upstart company may change that

Europe’s Real Crisis

The Continent’s problems are as much demographic as financial. They won’t go away soon.

Why Companies Fail

GM’s stock price has sunk by a third since its IPO. Why is corporate turnaround so difficult…