Quote:
Originally Posted by AlmightyJim
Which brings me to the answer to "WHO fucked the economy up?"
The U.S. Government did when they deregulated the derivatives market 
Who is to blame for the economy meltdown? Deregulation and Derivatives
http://www.southdacola.com/blog/2008...d-derivatives/
Report from 8/11/2000 - Deregulation of Derivatives Would Be a Bad Mistake
http://www.econstrat.org/index.php?o...49&Itemi d=46
Derivatives?Financial Voodoo for the Few
In the 1970s the wizards of Wall Street and their advisors introduced a set of financial instruments called derivatives. They were theoretically designed to lower risks for buyers and sellers, including those in recent times involved in Mortgage-Backed Securities (bonds). The primary use of derivatives is called hedging.
In some respects, derivatives were (and are) insurance-like contracts designed to protect, say, bond investors, from default by the bond issuers. The name, derivative, is used because the value of specific instrument is based on (derived from) something else.
The last few years, the complexity and prevalence of derivatives has escalated so that today there are futures, swaps, options, and other exotic hedges available to the wise and un-wise. All together, derivatives have accelerated and deepened the current economic crisis.
Story here: http://www.sanjuanislander.com/colum...t/part-2.shtml
Related Information
http://www.financialpolicy.org/dsclessons.htm
http://www.financialpolicy.org/dscabmistake1.htm
http://www.democrats.org/page/content/wiki/gramm/
http://www.nytimes.com/2008/11/17/bu...pagewanted=all
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Yes I agree...in 2000, when congress prevented states from regulating derivatives using their gambling and bucket shop laws....things like the "credit default swap" were created, and that's what led to this whole mess.
See folks, we all know a bunch of people got mortgages they could never pay back, on property that was overpriced....what most people don't know is that banks would have never lent the money unless they had what they thought was an insurance policy against the borrower defaulting.
That's where the credit default swap came in. A bank would loan the money and not care if you could pay it back, because they bought this other thing from AIG or Bear Sterns that would pay them back if you couldn't.
The problem was, since they weren't regulated, AIG and Bear Sterns etc didn't have the money to back up these "insurance policies", and once the mortgage defaults started, the whole house of cards started to collapse.
