Outsmarted

The New Yorker: “The Boca Raton meeting first bore fruit when Exxon needed to open a line of credit to cover potential damages of five billion dollars resulting from the 1989 Exxon Valdez oil spill. … but the deal would tie up a lot of reserve cash to provide for the risk of the loans going bad. … In late 1994, Blythe Masters, a member of the J. P. Morgan swaps team, pitched the idea of selling the credit risk to the European Bank of Reconstruction and Development. … The deal was so new that it didn’t even have a name: eventually, the one settled on was ‘credit-default swap.’”