Today's NYT has a long article on the role of deriviates in the market meltdown, Greenspan's continuous faith in them and Ed Markey's attempts to regulate them. Kudos to Markey. Too bad for all of us he was not successful.
October 9, 2008, The Reckoning Taking Hard New Look at a Greenspan Legacy, By PETER S. GOODMAN
“Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” — Alan Greenspan in 2004
George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.”
Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.”
And Warren E. Buffett presciently observed five years ago that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”