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Buffett doesn't see CDS market collapsing

OMAHA, Nebraska
Sat May 3, 2008 3:55pm EDT

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OMAHA, Nebraska (Reuters) - Warren Buffett said on Saturday he does not expect the credit default swap market to collapse, and possibly throw financial markets worldwide into chaos.

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Speaking at the annual meeting of his Berkshire Hathaway Inc (BRKa.N) (BRKb.N) insurance and investment company, Buffett cited the U.S. Federal Reserve's recent backing of an emergency buyout of the investment bank Bear Stearns Cos BSC.N by JPMorgan Chase & Co (JPM.N), which helped keep Bear Stearns from failing.

Credit default swaps are contracts that shift default risk between two investors, or allow investors to bet on the direction of credit markets. Buffett estimated the size of the market at more than $60 trillion.

"With credit default swaps, (the question is) whether counterparties could fail," Buffett said, referring to wide-ranging failures. "I don't think it's going to happen, and I think the chances of it happening were reduced significantly by the fact the Fed stepped in at Bear Stearns."

(Reporting by Jonathan Stempel; editing by Todd Eastham)
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