Financial Markets are Polluted with Risk

[EJ]

Do we need more government regulation or will the markets work it out?

[blazespinnaker]

I'm not sure there is an answer to that

But I like to think, like all things, it's a balance. On one side we have anarchy, which I've never seen work, and on the other we have centalized economies which don't seem to work either.

I think we need intelligent rules that leverage the wisdom of markets.

[jpmattia]

EJ-
So I'm a CDO-risk dunce. I think it would be helpful to see a specific (hypothetical (hopefully)) example of how a derivatives meltdown might occur.

Is it completely analogous to LTCM?

[BK]

Government regulation - yeh - right?
Wasn't it a Democratic Administration and then a Republican Administration that have been happy to expand home owner ship - without credit (a powerful and deadly tool in the wrong hands) and ever loosing credit neither administration could ever accomplish this dream/nightmare.
Look at the mess the government has created with the GSEs?

[Mauddib]

Do we need more government regulation or will the markets work it out?

That is the way it has always been.

Mauddib

[jeffolie]

Warren Buffett called derivatives " weapons of financial mass destruction".

They are borrowed money used to place a downpayment on borrowing more money. They are risk squared.

Credit derivatives bet on which way the credit payments of a loan will go - either paid as agreed against not paid.

[Ed]

Do we need more government regulation or will the markets work it out?
In my view:
Because the financial news media’s presentation of relevant historical truth is seriously compromised by their dependence on paid advertising by the financial services industry, I favor some entity that, by law, keeps such “relevant historical truth” in the public’s face ongoingly. As the example I know best: I reckon that stock market price bubbles would be well-deterred by keeping in the public’s face ongoingly Shiller’s
http://www.itulip.com/StocksvsInterestRates.htm
and/or my
http://homepage.mac.com/ttsmyf/RealDow.gif

Intellectual honesty is the only tool required.

[jeffolie]

EU Regulators Aren't Prepared for Financial Crises, Report Says
April 6 (Bloomberg) --

European Union regulators aren't prepared for financial crises at a time when hedge funds and private buyout firms pose rising risks to the economy, EU finance ministries said in a confidential report.