Credit Default Swaps... You Fickle Beasts

Here's an article from CNN Money going into the $4.8 billion that stands to be made if the U.S. goes into default.  The method?  Credit default swaps (CDS).

Betting $4.8 Billion on a U.S. Default

It's not that I blame the investors for taking this chance, and the article clearly makes it sound like the possibility of collecting on these swaps  is essentially zero, but it disturbs me to see CDS's still lingering around after all they have done for us in the last 5 years.

One memorable quote, responding to the notion that some investors lacking faith in the bureaucratic romcom that is the U.S. Government are about to hit it big ...

"I think we're a long way away from considering this hypothetical [case]," said Otis Casey, director of credit research at Markit.

So my overall take away from the article is that "a long way away" equals about two weeks in Earth time.

Truth be told, a number of stumbling blocks seem to stand between investors and their money even if the U.S. does technically default, making it sound impossible to ever cash in.  But that's the rub with issuing CDS's... you're insuring against something that would just be too crazy insane to actually happen and then Lehman Brothers goes under.