Credit Default Swaps

Can you explain Credit Default Swaps? Here's what I think. Credit Default Swaps are quasi-legal, but undefined, unpublished wagers. Say you are in charge of a very large bank. You want to make a very large bonus this year. So you find a company of country that's in deep financial trouble. Like, ready to declare bankruptcy. So you go to them and offer to loan them a big chunk of money so they don't have to go under. The terms are that they have to keep the whole thing secret and they have to pay it back in too short of a time to be possible. Then you do two things. You sell the loan to a third party assuring them it's a good investment. Then you bet with a fourth party that the company or country in question will go bankrupt. It's what you call a win-win deal. At least for you. Problem is, that three others loose big time. The company/ country goes under big time, the lender who bought the loan, looses all of it's investment and the other gambler looses because they didn't know the fix was in. Now, before I said it was quasi-legal. That's because nobody tested it yet. Of course when the Mafia does something like that, the Feds hunt them down and puts them in prison, if they can. If you or I did that, we'd get a date with the hangman. But if you're the big banker, and you don't let anybody know, well then, it's all above board. It must be nice being a big banker. For sure you can afford sleeping pills, if that becomes a problem.