In 1980s, financial derivatives were just "little brothers" in financial markets. However, because most financial derivatives use capital leverage, the yield is amazing when the market is booming, so Wall Street constantly "innovates" financial derivatives. In 2002, this market expanded to 106 trillion US dollars, and now it reaches 53 1 trillion US dollars.
High returns inevitably hide high risks. Soros, a "financial crocodile", has been giving orders in other investment markets, but he has stayed away from financial derivatives. Buffett has long warned that the potential threat of these financial products can be called "fatal".
There is only one voice that resolutely defends the financial derivatives market, and that is Greenspan.
Greenspan admired financial derivatives so much that when the "devil's face" first appeared, American lawmakers and Wall Street people put forward regulatory opinions, and he resolutely opposed them. Greedy speculators on Wall Street made the financial derivatives market bigger and bigger, and eventually involved the United States and even the whole world. As early as 1997, Ms. Bowen, then chairman of the Commodity Futures Trading Commission of the United States, believed that opaque trading tools such as financial derivatives might damage the market and required traders to disclose more details. Both Greenspan and then US Treasury Secretary Rubin expressed strong opposition. Greenspan even warned Bourne that what she did would "trigger a financial crisis".
During the period of 1998, the "long-term capital management" of hedge funds went bankrupt because of derivatives investment, which triggered a financial storm. However, under the pressure of Greenspan, the US Congress still announced that it would freeze the supervision power of the Commodity Futures Trading Commission for six months. 1999, born left, and Congress permanently abolished the supervision power of Commodity Futures Trading Commission on financial derivatives.
Many economists believe that if Greenspan had adopted different policies during his tenure as chairman of the Federal Reserve, perhaps the current financial crisis could have been avoided, at least not so serious.
When the signs of a bubble in the US real estate market became obvious, Greenspan still ignored the huge hidden risks. In 2004, he said that Wall Street was using financial derivatives to "dilute" the risks of other institutions. Soon, with the intensification of the real estate crisis and the surge of non-performing mortgage loans, the amazing derivatives market dramatically amplified this crisis called "once in a hundred years" by Greenspan.
Even so, Greenspan's "faith" in derivatives has not wavered. He didn't admit the lack of supervision, but blamed the crisis on the greed of investors. However, in the market's view, Greenspan, who once kept his word, has obviously stepped down from the altar. The New York Times said that Greenspan gradually faded out of public view, and the number of appearances dropped sharply.