The Broader Market

Given the policy debate on the regulation of derivatives, I posted a short talk by Michael Greenberger on the subject.  Greenberger had been Brooksley Born’s number 2 at the Commodity Futures Trading Commission when they had pushed for increased oversight of derivatives trading.  Greenspan, Summers and Rubin had strongly and successfully resisted these efforts.  Their general argument was that a derivatives contract was an “important vehicle for unbundling risks.”  Today, that argument does not seem to hold water as derivatives contracts were not so much designed to reduce risk, but to place directional bets (such as bets that a certain financial institution will go bankrupt). 

Expect a substantive policy post on this topic to come.