Woman Who Invented Credit Default Swaps is One of the Key Architects of Carbon Derivatives
December 9th, 2009Via: Washington’s Blog:
Bloomberg notes that the carbon trading scheme will be largely centered around derivatives:
The banks are preparing to do with carbon what they’ve done before: design and market derivatives contracts that will help client companies hedge their price risk over the long term. They’re also ready to sell carbon-related financial products to outside investors.
[Blythe] Masters says banks must be allowed to lead the way if a mandatory carbon-trading system is going to help save the planet at the lowest possible cost. And derivatives related to carbon must be part of the mix, she says. Derivatives are securities whose value is derived from the value of an underlying commodity — in this case, CO2 and other greenhouse gases…
Who is Blythe Masters?
She is the JP Morgan employee who invented credit default swaps, and is now heading JPM’s carbon trading efforts. As Bloomberg notes (this and all remaining quotes are from the above-linked Bloomberg article):
Masters, 40, oversees the New York bank’s environmental businesses as the firm’s global head of commodities…
As a young London banker in the early 1990s, Masters was part of JPMorgan’s team developing ideas for transferring risk to third parties. She went on to manage credit risk for JPMorgan’s investment bank.
Among the credit derivatives that grew from the bank’s early efforts was the credit-default swap.
i’m glad you posted this.
the significance of this connection should not be understated.
credit default swaps make naked shorting of equities look like a playful but harmless diversion.
if CDS are the cancer of the financial system, then carbon trading derivatives might become the embalming fluid?
we can only hope!
This cap and trade nonsense is a scam of unbelievable proportions.
http://www.telegraph.co.uk/finance/businesslatestnews/6686057/European-Climate-Exchange-chief-Patrick-Birley-defends-the-carbon-trading-system.html
“Carbon-related products are probably the most profitable part of trading for any of the investment banks right now, because the margins are so good,” Mr Birley admits. “Because it’s such a specialist area, a little bit of knowledge goes a very long way.”
Part of what makes the profits potentially so high are the price swings. Currently carbon is 20pc more volatile than oil, meaning utilities need the banks to help shoulder some of the risk associated with trading and provide liquidity.
How fitting that her name is Blythe. A common definition of “blithe,” of course, is carefree, without thought or regard, heedless. Used in a pookian sentence: Blythe Masters had a blithe disregard for the destruction she left in her wake.
She looks like someone with a future in advising President HopeAndChange.