I have always tried to explain to friends that true capitalism is not greedy. The article below exemplifies, in my opinion, the worst capitalism can be. Read "The Man Who Sold the World" at BoilingFrogs.

What is a credit default swap?

It is a contract or insurance policy between a seller (a bank) and a buyer (bondholder). The CDS maintains that the seller agrees to pay the buyer in the event of a bond default or bankruptcy. A CDS is essentially bond insurance.

The idea was presented to Cassano ten years ago, soon after his selection as head of AIGFPD, by derivative specialists from J.P. Morgan: AIG should try writing insurance policies on packaged debts known as collateralized debt obligations, pooled loans sliced into tranches and sold to investors based on their credit worthiness.

Basically, the proposal meant that the London-based unit was agreeing to provide insurance to financial institutions holding C.D.O.’s and other debts in case they defaulted…much like homeowners are required to purchase mortgage insurance to protect lenders in the eventuality that the borrower cannot pay back the loan.

[...]

Unread legislation, slammed through without debate in a show of bipartisan recklessness, signed into law by a lame-duck President in the waning days of his tenure. Thoughtless, politically-driven financial decisions designed to garner votes. Promises of higher corporate taxation from a Socialist Presidential candidate drunk on the wine of populism and hubris. All these factors contributed to this crisis, and led to the loss of untold billions of dollars worth of wealth.