A credit default swap (CDS) acts as a sort of insurance on bond interest payments and principals. If an owner of a bond wishes, he/she can form a CDS agreement with a CDS seller for a portion of the interest received from that bond. At which point, the CDS seller assumes all of the risk of the bond. If the bond issuer defaults on either the interest payment or the principal at maturity then the CDS seller will fully compensate the CDS buyer. A lot of times investment funds, retirement funds, investment firms, banks, etc. engage in these types of derivatives. The market for these derivatives is largely underground, and summations as high as $63 trillion have been made. It is huge. Most people don't know about this market. Most of CDS activity is highly unregulated. CDS sellers are not required to own a license to issue CDS's which means that they cannot be criminally prosecuted if they decide not to compensate the CDS buyer. This has and does happen from time to time. The biggest problem is this...most of the institutions that engage in CDS derivatives do not have the cash reserves to compensate CDS buyers. They simply just assume the risk because they get a portion of that bond interest for doing absolutely nothing. They assume that the risk is worth it because, according to them, most bonds do not default even though they have a low credit rating. While at the same time, CDS buyers believe that they have hedged most of the risk involved with owning bonds simply by purchasing CDS agreements on those bonds. The fact is nobody has any idea as to how risky the CDS market really is. There have been instances where CDS sellers popped smoked when it came time to compensate CDS buyers. On top of it all, there is a lot of illegal activity that takes place behind CDSs. A CDS seller will form an agreement with a CDS buyer then take that agreement and sell it to, lets say, an investment firm for a fee. The CDS seller will sell the agreement to investment firms like Lehman Brothers and JPMorgan, Inc (Jєω controlled investment firms). At which point, the investment firm will collect a portion of the interest of the bond for doing absolutely nothing. At the same time, many investment firms, hedge funds, banks, etc. are assuming liabilities of $100 billion or more in Credit Default Swaps alone. This figure is far more than what they can handle, but they continue to do it anyways. The cash flows from CDSs are too difficult for them to turn down.

How are the Jєωs making their money? Banks are using depositor's cash as collateral on these agreements without us even knowing about it. Which means that if they have to compensate a CDS Buyer they use our deposit money to do so. At the same time, they are collecting a portion of the interest payments from bondholders and pocketing that money. This is large in due to how underground this market is, and our ignorance about them engaging in it. If banks feel that they have too many CDS agreements then they will sell off some of them to investment firms like Lehman Brothers and JPMorgan, Inc. (Jєωιѕн owned investment firms). These organizations do the same things that banks are doing. They assume massive liabilities placing them into a position that is way over their head in order to collect just a chunk of the interest from bondholders. USING OUR MONEY AS COLLATERAL WITHOUT US KNOWING ABOUT IT. THEN POCKETING THAT MONEY WITHOUT ANYONE KNOWING ABOUT IT BECAUSE IT IS HIGHLY UNREGULATED. MASSING FORTUNES!!!!! AFTERALL, THIS UNDERGROUND MARKET HAS BEEN ESTIMATED AT $63 TRILLION AND IT IS ALL UNDERGROUND. THE JєωS ARE GETTING EVERY BIT OF %1-%2 OF THAT $63 TRILLION ANNUALLY. THEN POCKETING IT. WITHOUT US KNOWING ABOUT IT....USING OUR DEPOSITS AS COLLATERAL.