Peter Hancock and CDS

Peter D. Hancock, 52, Chief Executive Officer of Chartis Inc. of Lexington Insurance Company and American International Group, In. is described by a former employer as an "architect" of the derivatives business, to oversee finance and risk, including the insurer's money-losing credit-default swap unit. He has been in this position since March 2011 after 20 years working at J.P. Morgan and being a vice chairman for Key Corp.  

Gillian Tett, a journalist of the Financial Times, wrote a book Fool’s Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe based on the invention of credit-derivative obligations (CDOs) at J. P. Morgan in 1994.

Peter Hancock and their colleagues came up with a product that is part insurance, part speculative vehicle, and built a market for it – beginning with a transaction in which the European Bank for Reconstruction and Development in 1994 contracted for a modest sum to assume the risk that Exxon (XOM) wouldn’t repay a $4.8 billion line of credit it had borrowed from Morgan in order to pay the fine for its Exxon Valdez oil spill. EBRD made a small but tidy profit; Morgan got the risk off its books and was able to make more loans. From these blue-chip beginnings, a major market was born. Morgan did the hard work, standardizing contracts, persuading regulators of the legitimacy of the transaction, explaining the utility of its new product to customers. Before long Morgan’s competitors were writing CDS insurance on every kind of credit imaginable – including subprime mortgages.