In response to the global economic crisis and the significant downturn in the financial services sector caused in part by losses in the highly volatile credit default swaps market, Assembly Speaker Sheldon Silver and Assembly Insurance Committee Chair, Joseph Morelle today announced a hearing to examine how the state may provide oversight and regulation of these speculative financial insurance products.

The hearing, to be held on Friday, December 5 in New York City, will explore the credit default swaps market, in which some large insurance companies insure debt in the event of default owed by private companies as well as mortgages and municipal bonds. A class of transactions called "naked swaps" involve investors who do not own a particular debt but instead bet on the probability that a particular bond or mortgage will default. In the recent financial crisis many of the companies providing these financial products did not have sufficient revenues to cover potential losses and certain large investors went into default, causing a ripple effect throughout the industry.

"It is crucial to the long-term economic health of New York City and state and to the restructuring of our financial services industry that we understand the state's regulatory responsibilities over the credit default swaps market," said Silver (D-Manhattan). "The inattention of the federal government in providing oversight of this marketplace has had disastrous effects on the state and national economy. This important hearing will help us know the extent of this crisis and how we may avoid it in the future."

"As we attempt to understand the genesis of the current economic crisis and develop strategies for avoiding similar episodes in the future, credit default swaps constitute a very large and troubling question mark," said Morelle (D-Irondequoit). "New York's unique exposure to weaknesses in the financial sector dictate that we aggressively seek a better understanding of how credit default swaps work, what went wrong, and how and whether state government can play a role in governing a market equal to nearly four times the entire gross domestic product of the United States."

The committee will hear from insurance experts and economists on what regulations are necessary to stabilize the financial services industry, whether the state Insurance Department can play a role in regulating credit default swaps or whether federal regulations will be needed to oversee this marketplace.

The hearing will be held on Friday, December 5 in New York City in Assembly Hearing Room 1923, located at 250 Broadway at 10:00 a.m.