Everyone says it’s like insurance, only with insurance, at least since 1746, it has been illegal to take out insurance on anything that you do not have, “an interest in the continued existence of the insured property,” but anyone can take out a Credit Default Swap (CDS) on anything.

All they need to do is find a counter-party.

Well, this may be coming to an end, since European regulators are looking at taking steps to forbid the practice:

José Manuel Barroso, European commission president, said it was “not justified” to buy credit default swaps “by unseen interventions on a risk, on a purely speculative basis”. Photograph: Vincent Kessler/Reuters

The European commission announced moves today to shore up the euro and ward off market pressure on Greece by considering a ban on complex derivatives allegedly being used to undermine the single currency.

The draconian move suggested by José Manuel Barroso, commission president, follows a joint campaign by the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, for a prompt clampdown on credit default swaps (CDS).

I’m sure that Timmy “Naked CDS is Essential for Price Discovery” Geithner hates this, but who cares what he thinks: The only reason he’s still Secretary of the Treasury is because Barack Obama knows that the Republicans would filibuster his successor out of spite.