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ahhhh yes DERIVATIVES--------

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according to treasury

end of 2rd quarter 2007 derivatives were 153 trillion, compared to 62 trillion in 2003.

Trillion...mostly interest rate swaps though. 80%. You have an adjustable rate security, for a fee I'll pay you a set rate and I'll collect the contract rate. Sounds like a bet on interest rates. 5 banks hold most derivatives, and they have the benefit of the FED to control rates...probably a pretty good business. During the second quarter of 2007, U.S. commercial banks had net losses of $9 million from derivatives, or .004 percent of the net current credit exposure from derivative contracts.

Credit default swaps are apparently another story.


I may be wrong...

but I think this is part of the difference in this crisis. The amount invested in securities that are solely based on the value of other securities. That a fall in some assets would inevitably trigger a fall in others. I'm gonna read this long article to get up to speed, thanks.

welcome...when these paper

welcome...when these paper intrstuments become worthless.. bank a cannot pay bank b. bankb cannot pay bank c etc etc etc. is called cascading cross defaults! derivatives are unsecured paper..

It will also cause tsunami

in overseas markets and banks too, right?