So in doing some basic research on derivaties I came across a 1,500 plus page book that cost $410, "Derivatives for Dummies", it was not.
No, I did not buy the book!
Some highlights:
In 2002 the market was about a 100 trillion dollars, so these are major players in the market. Around 2008 that had increased to over 500 trillion. It wasn't just a major market anymore, it was THE market!
Incredibly complex very few people actually understood HOW they worked or the ramifications if they didn't. But they were a money maker, so party on!
The SEC used regulatory standards setup by "International Swaps and Derivatives Association", (wolf guarding the hen house right there).
I believe this was the KEY item responsible for our economic melt down. I don't have a clue how to regulate them. But more troublesome, I'm not sure the SEC or anyone in Government quite has a handle on how to regulate them either.
fastd your point about size is well taken. We can spread the load out to smaller companies, but the end result may effectively be the same. If they ALL go broke, were right back where we started! Instead of a few companies, it's now's hundreds, end result, same same.