The Economist

"Counter Insurgency: Central counterparties may not be all they are cracked up to be", The Economist, 06.27.2009, 83.

Central Counterparties act as the buyer to every seller in a market, and the seller to every buyer. They collect margins on every trade; members put money into a reserve fund as well. Traders only have to worry about the creditworthiness of one entity, with which they can net off their trades. If a big trader goes under the financial system is less likely to go with it.
...
Not everyone is happy about this trend. Craig Pirrong of the University of Houston worries that CCPs dull the incentive to trade prudently. Traders are more likely to take on risky positions because some of the losses they may generate are ultimately borne by others - the CCP and its other members. As for a CCP itself, however well intentioned it may be, it cannot monitor traders' complex derivative prositions as well as they themselves can. And it is probably less motivated to try.

[Centralization]


"Can pay, won't pay: It is easier to dump a home loan if a friend has done so too", The Economist, 06.27.2009, 83.

Anger about bail-outs of banks or carmakers does not weaken the moral barrier to default. But people who live in neighbourhoods where home repossessions are frequent are more likely to welsh on loans. Homeowners who know someone who has defaulted strategically are 82% more likely to say they would do so, too. The likelihood of strategic default rises more quickly once the rate of local home foreclosures reaches a critical level. That hints at a vicious cycle of foreclosures that both depress home prices and weaken the social and economic barriers to further defaults.

[Critical Mass]