In the words of Wall Street, the essence of financial derivatives is a risk "hedging" tool, which provides "insurance" for other investments such as stocks, bonds and mortgages.
In the 1980s, financial derivatives were just "little brothers" in the financial market. Because most financial derivatives use capital leverage, the yield is amazing when the market is booming, so Wall Street constantly "innovates" financial derivatives. By 2002, this market had expanded to 106 trillion US dollars. At present, the financial derivatives market is 53 1 trillion dollars.
Among the doubts of these financial elites, only one voice resolutely defends the financial derivatives market. He is Greenspan, who was in charge of the Federal Reserve from 65438 to 0987 to 2006.
Greenspan admired financial derivatives so much that when these financial products appeared "devil's face" and some US congressmen and Wall Street people put forward supervision opinions, he resolutely opposed them. Because Greenspan's prestige was in full swing at that time, no one in Congress dared to raise his voice, and all the regulatory opinions put forward by members came to an end, so that greedy speculators on Wall Street rolled up the financial derivatives market more and more, and eventually involved other financial institutions in the United States and even the world.
As early as 1997, the US Commodity Futures Trading Commission began to supervise financial derivatives. Ms Brooksley Born, then the chairman of the Committee, believed that these opaque trading tools might damage the market and even the American economy, requiring traders to disclose more trading details and risk reserves.
Greenspan and then US Treasury Secretary robert rubin strongly opposed Born's opinion. Greenspan even warned Born that what she did would "trigger a financial crisis".
In the second year, I was born left. In June of the same year 165438+ 10, under the impetus of Greenspan, Rubin and others, Congress permanently abolished the supervision power of the Commodity Futures Trading Commission on financial derivatives.
Many economists believe that if Greenspan had taken different policy actions during his tenure as chairman of the Federal Reserve, perhaps the current financial crisis could have been avoided, at least it would not have developed to such a serious situation.
In the later period of Greenspan's term, the risks of financial derivatives aroused the vigilance of Buffett and other investment giants. In his annual report to shareholders of Berkshire Hathaway in 2003, Buffett said that the huge credit risk has been concentrated in the hands of a handful of derivatives traders. "If one person is in trouble, it will quickly spread to others."