Monday, March 1, 2010
DDT: Derivative Disaster Of Tomorrow
It is Monday, and while I don't want to rain on anyone's parade, I am back to talking about the mess the future for financial regulation in the United States is in.
Very few people understand what a derivative is. In fact, if the population of the United States had as much understanding of what a derivative is, as they do to what cancer is, we would have meaningful regulation from Congress coming down the pike to guard us against another financial disaster. The unregulated derivative business, the part of AIG's business that required the Federal Government to bail it out of certain bankruptcy, and bringing about a world wide financial panic, is what I am talking about. Unfortunately, after all these months since the bailout by the Federal Government, we, as a nation, are no further along to building a better regulatory environment for derivatives. In the next financial panic, there might not be enough cash, credit or confidence to backstop the crisis.
So, while Congress plays with all our lives, with their collective heads in the sand, I am telling everyone, as James Baldwin once said, it may be "the fire next time."