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In my country borrowing for your company became incredibly difficult (if not outright impossible) if you didn't 'hedge' yourself using derivatives. None of the

In my country borrowing for your company became incredibly difficult (if not outright impossible) if you didn't 'hedge' yourself using derivatives. None of the (AAA) banks like Rabobank explained what the risks of using these products were. They were sold as 'safe' interest-fixed products. Apart from that most were locked at the Euribor rate. You know, the one they forged...

retube 13y ago
Mis-selling of swaps and attempts at libor fixing are completely seperate issues. They have nothing to with, or precipitating, the financial crisis.
- digitalengineer 13y ago
  You ask 'what's so terrible about derivatives? ' well their very non-transparant nature and lack of regulation and registration.
  - 001sky 13y ago
    I'm not one to apologise for the post glass-stegal investment banks, but your're comment is confusing. Are you saying the banks tied the interest rtates on basic loans to companies purchases of other banking products? As a general rule, the financial crisis was caused by <loans that were too cheap>. Not by derivatives. The issue of derivitives is a more incidental role in the whole story. To use an analogy, something else caused the accident. Derivatives were like the airbag not deploying. Still a problem, but not in the way you are implying. It is also arguably the case that loans were too cheap because the banks were like a supermarket selling one product at a loss (debt) to get customers in the store (so called "loss-leader" product). And then they took advantage of the less educated consumers (ie, selling derivatives to people that should have known better). This is of course, why glass-stegal was in fact originally law. To prevent ths type of bundling. One thing this article fails to point out, though, is that the clinton administration got this model by copying it from the brits and europeans who long favoured the so-called "universal banking" model. so in that sense, its dis-ingenous to imply the usa was imposing or exporting this model via the WTO (it was the staus quo in Asia, too). For historical reasons, the continentals (eg, Germany), the Japaneese and others, never split off teh i-banks from the lending banks [1,2]. As a rsult, the CEOs of those combined banks were paid more than their US counterparts. This whole fiasco was driven by the US ceo's of the debt banks who were missing out on the windfalls accorded to the Investment Bank CEOs during internet 1.0 bubble. If you look at the history, the banks bought up the i-banks (as they had much larger balance sheets) and the CEO pay skyrocketed. [1] https://en.wikipedia.org/wiki/Universal_bank https://en.wikipedia.org/wiki/Universal_bank [2] https://en.wikipedia.org/wiki/Keiretsu https://en.wikipedia.org/wiki/Keiretsu
  - kasey_junk 13y ago
    Depending on the jurisdiction, lots of derivatives trading is subject to more regulation than cash products. And what is not transparent about derivatives? Every one I've ever seen has a very specific and detailed contract. Some of them are complicated, but that's not the same thing as non-transparent. Commodities futures are derivatives, and all of their contract specifications are available on the web, and easy to read by a layman.

retube 13y ago

Mis-selling of swaps and attempts at libor fixing are completely seperate issues. They have nothing to with, or precipitating, the financial crisis.

digitalengineer 13y ago
You ask 'what's so terrible about derivatives? ' well their very non-transparant nature and lack of regulation and registration.
- 001sky 13y ago
  I'm not one to apologise for the post glass-stegal investment banks, but your're comment is confusing. Are you saying the banks tied the interest rtates on basic loans to companies purchases of other banking products? As a general rule, the financial crisis was caused by <loans that were too cheap>. Not by derivatives. The issue of derivitives is a more incidental role in the whole story. To use an analogy, something else caused the accident. Derivatives were like the airbag not deploying. Still a problem, but not in the way you are implying. It is also arguably the case that loans were too cheap because the banks were like a supermarket selling one product at a loss (debt) to get customers in the store (so called "loss-leader" product). And then they took advantage of the less educated consumers (ie, selling derivatives to people that should have known better). This is of course, why glass-stegal was in fact originally law. To prevent ths type of bundling. One thing this article fails to point out, though, is that the clinton administration got this model by copying it from the brits and europeans who long favoured the so-called "universal banking" model. so in that sense, its dis-ingenous to imply the usa was imposing or exporting this model via the WTO (it was the staus quo in Asia, too). For historical reasons, the continentals (eg, Germany), the Japaneese and others, never split off teh i-banks from the lending banks [1,2]. As a rsult, the CEOs of those combined banks were paid more than their US counterparts. This whole fiasco was driven by the US ceo's of the debt banks who were missing out on the windfalls accorded to the Investment Bank CEOs during internet 1.0 bubble. If you look at the history, the banks bought up the i-banks (as they had much larger balance sheets) and the CEO pay skyrocketed. [1] https://en.wikipedia.org/wiki/Universal_bank https://en.wikipedia.org/wiki/Universal_bank [2] https://en.wikipedia.org/wiki/Keiretsu https://en.wikipedia.org/wiki/Keiretsu
- kasey_junk 13y ago
  Depending on the jurisdiction, lots of derivatives trading is subject to more regulation than cash products. And what is not transparent about derivatives? Every one I've ever seen has a very specific and detailed contract. Some of them are complicated, but that's not the same thing as non-transparent. Commodities futures are derivatives, and all of their contract specifications are available on the web, and easy to read by a layman.