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Credit Default Swaps were invented in 1997 by a team working for JPMorgan Chase. They were designed to shift the risk of default to a third party, and were therefore less punitive in terms of regulatory capital.
Credit Default Swaps became largely exempt from regulation by the SEC and the CFTC with the Commodity Futures Modernization Act of 2000, which was also responsible for the Enron loophole. President Clinton signed the bill into Public Law (106-554) on December 21, 2000.