That’s exactly the point, Stephen. The derivatives market cannot be easily framed in ideological terms, which implies, with history as our guide, that it will be ignored – left to the financial wizards, like Michael Milken, who created these “vehicles” to now … do what exactly?

Achieve a political policy goal?
Stabilize the markets?
Free up credit?
Keep Russia and Europe afloat?

So far the only “policy” direction to emerge is the need to eliminate F&F and the rest of the GSE’s. This won’t “fix” the risk in derivatives paper.

Pascal – I personally would define derivatives as vehicles that disguise risk. As such, they can be applied to any market, which is the danger. The basic structure was created by Michael Milken. Derivative securities were at the heart of the LTCM collapse in 1998. When real estate took the big five financial houses went into full gear. I would make the use of derivatives illegal. I do not see how transparency in this type of vehicle can be regulated in any meaningful way. It seems to me like a short-cut to fast money that should simply be removed from the system.