Commentary: Dodd-Frank is needed to prevent an AIG-type meltdown

05/31/2012 | Bloomberg

Matthew Schoenfeld, a student at Harvard Law School, writes that the Dodd-Frank Act contains initiatives intended to prevent a repeat of the woes suffered by American International Group in 2008. The law "sheds more light on the credit derivatives that got AIG in trouble, so regulators can see if any company is taking on too much risk," Schoenfeld writes. "It requires that parties to derivatives contracts put up adequate collateral -- cash that would cover debts if one or more of them went bust." However, Dodd-Frank lacks a crucial element, he argues.

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