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Derivatives Still Pose a Threat 

September 8, 2014
Barry Elias, Money News

Federal regulators have proposed a ruling to reduce the risk of over-the-counter (OTC) derivatives in our financial system and the general economy. 

These financial instruments are used for speculation, arbitrage and hedging of production risks. Since they have no margin requirements, no funds are put aside to offset potential loses. Wall Street firms earned large profits from this activity. It was a major contributing factor to the financial crisis in 2007 and 2008. 

Unfortunately, the lessons of the financial crisis are not taking root.

The ruling proffered by the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and other regulators falls well short in substance and too long in time to counter the potential risks to our economic well-being.

Read more: MoneyNews

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