Sununu Voted for No Oversight of $70 Trillion in Swaps Market

For Immediate Release
September 22, 2008

Credit default swap market exploded due to lack of oversight, pushing our economy further toward disaster

(Manchester, NH) - As part of his long record opposing Wall Street oversight, John Sununu voted to allow the enormous credit default swap market to go entirely without oversight, a market the has ballooned to over $70 trillion per year and played a huge role in the collapse of insurance giant AIG. Sununu voted in favor of former Senator Phil Gramm's Commodity Futures Modernization Act, which explicitly exempted credit default swaps from any regulation or oversight.

"John Sununu's 12-year record of fighting Wall Street oversight has put our economy into a crisis, and middle class families are paying the price for his recklessness," said Alex Reese, press secretary for the NHDP's Coordinated Campaign. "Sununu has stood with Bush in opposing oversight, and now a completely unregulated $70 trillion per year market is threatening to tear down our entire economy. We need a new direction that holds Wall Street accountable and protects middle class taxpayers, but a new direction takes a new senator."

John Sununu sat on the Senate Banking Committee for five years and watched while the credit default swap market exploded, arguing all the while that oversight would only restrain our nation's economy. With no oversight, Wall Street gambled trillions on this little understood financial instrument, and investment firms often gambled far beyond their means to pay if the gamble went bad. According to Time Magazine, the credit default swap market now threatens to become the "eye of the hurricane" threatening our financial system.

Credit Default Swaps and Sununu's Record of Opposing Oversight

• John Sununu Voted For Phil Gramm's Commodity Futures Modernization Act. Section 206A(a)(3) explicitly exempts credit default swaps from any oversight whatsoever. (Click here for text of the bill)
• With No Oversight, Credit Default Swap Market Grew to $70 Trillion Annually."The CDS market has grown into a $70 trillion annual business." [NPR, 9/18/08]
• Credit Default Swaps Were Largely Responsible for Collapse of AIG."The company's problems stem from the more exotic financial products it offers, including some that insure risky debt and bonds against default. The value of those instruments, known as credit default swaps, have deteriorated amid the downturn in the credit markets over the past year. ... For the three quarters ending in June, AIG lost about $25 billion in the value of credit default swaps." [Associated Press, 9/19/08]
• With No Oversight, Credit Default Swap Market Grew to $70 Trillion Annually, Threatening Our Entire Financial System.
  • "The CDS market has grown into a $70 trillion annual business." [NPR, 9/18/08]
  • "A meltdown in the CDS market has potentially even wider ramifications nationwide than the subprime crisis." [Time, 3/17/08]
  • "The situation is exacerbated by the heavy trading volume of the instruments, the secrecy surrounding the trades, and - most importantly - the lack of regulation in this insurance contract business." [Time, 3/17/08]