All types of derivatives are dangerous & can cause serious damage to an economy
Certain types of derivatives are OK, but other, more complex types lead to major trouble
They are not dangerous & should only be the business of those involved
Other (please state)
Ted Cruz is the dumbest person alive.
Interesting enough, the only two Financial entities that were not forced to collateralIzed their securities were Fannie and Freddie. WE got stuck with their losses.
On a side note, Credit derivatives held now by investment banks dwarf the amount of MBSs derivatives that nearly collapsed the economy back in 2008.
I acute hike in interest rates wouldn't just bankrupt the FED but would bankrupt major Wallstreet institutions.
" If no one among us is capable of governing himself, then who among us has the capacity to govern someone else ? "
Most need to be banned.
Insuring a loan is impossible. If you loan, YOU take the risk. NOT the tax payers.
The rest regulated. Only allow new ones after 10 years of testing.
They are the root of all evil in 2008 total meltdown.
But no one knows what they are.
Read "The big short" and "Reckless endangerment" .
Each party to the deal improves their position by the transaction. The most straight forward case is the case of a forward, wth which each side reduces their risk. One sells Dollars he knows he will receive in three months, when he ships the finished Porsche to the American dealer. The other sells Euros she knows she will get for consulting the Dutch government on software security. One of the two will certainly "loose" in the sense of having had a better exchange rate had they waited. But both are better off, because the knew from the start that they would not "loose" in the sense of not being able to pay their bills, when the job was done. The risk of receiving Euros at a set rate instead of at the better rate is not a problem for Porsche. Their risk was that the rate might fall and that they would not have the cash to pay their workers and would have to let them go.
This actually happened to Porsche before they started hedging and they almost bancrupted.
they did not care at all about home sales, or people at all.
Read Reckless endangerment.
To eliminate this "deal" incentive, you must eliminate all derivatives in home sales.
of course the real solution is this. Ban the Mortgage.
No mortgage. No leeching banker. N o wall street. USA did it for 100 years, we can do it again.