New York Fed, 17 firms meet to reform derivatives trading

0 Comments | AFP, June, 2008

NEW YORK (AFP) — The Federal Reserve Bank of New York met with 17 financial firms Monday to propose broad reforms in derivatives trading that has sparked global financial instability, the head of the regional bank said.

Timothy Geithner, president and chief executive of the New York Fed, the branch of the central bank that deals with the financial markets, said the Fed in particular wants to create a central clearing house for credit default swaps.

Those swaps are designed to transfer the credit exposure of fixed income products between parties and often have been linked to US subprime, or high-risk, mortgages.

"The severity and complexity of this crisis makes a compelling case for a comprehensive reassessment of how to use regulation to strike an...