Another fraud-apparent has come into the light, where a fertility company matched childless couples with surrogate moms and funneled the payments from the parents-to-be to the surrogate mom via an escrow company, which has just gone under. With the money gone, what should the surrogate moms do? What will happen to the kidlings? This has a slew of people in a tizzy.

In general, how do you deal with the risk of a company defaulting? Some people would say regulate them, some would say buy insurance, and others would say caveat emptor. While partial to the notion that every company could publish financials that we could track, we would still get blind-sided by frauds as they could just make up the reported numbers. And with Caveat Emptor, the situation remains the same.

Funny (or sad) as it may sound, the much maligned Credit Default Swaps could be made to work in this situation. However, even with the new rules, we can only hope to trade risk in a small surrogate-mom-related company for that of a larger theoretically-more-monitorable company. I'd have preferred to see CDSs become an exchange-traded futures on company defaults, with an eye to becoming a large general market so any person could buy some insurance.

Looking to the future, the world is going to get a whole lot richer over the next century. And yet, we will most certainly see part of those hard-won gains erased by frauds, incompetence, and plausible deniability. Good thing we're not going to do anything about it.