The Greenspan Legacy

Great NYT article on the derivatives market and how former Fed Chairman Alan Greenspan was such a fan of them despite other top money men predicting their dangers.

"For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street."

At the time, many saw the blinking red light:

"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.”

The derivatives became like "funny money", no one knew how they worked or who's money it was. We're talking $531 trillion in this year. With all these derivative contracts in play, leveraged 30 times their value in some cases, with no oversight or regulation, given the thumbs up by the Fed, just sprinkle on some greed and watch it all go up in smoke.

Source: NYT Times