Excellent explanation! Very informative!!
1. Do you include Put & Call Options in your definition of "derivatives?"
2. How 'bout "naked shorts?"
3. How 'bout anything "leveraged" in securities markets?
By the way, I remember Dodd being lobbied even more heavily than Graham to passing the death knell to "the tie that binds" banks!!! (even if it did have Graham's name on it)
I really enjoy your posts and commentary! Bravo!! Encore!!!
If I remember correctly from my money & banking course, though it's just been a few weeks, put and call options are considered "derivative" instruments, though I may be wrong. Naked shorting (and naked calls, naked puts...hell, naked anything, except for
the Hooters girl from Hampton, Va.) basically allow for trading of things that don't exist. And, yes, leverage is a problem, especially when you don't know how large the leverage is in a pool of funds, and the funds' owners think someone else is gonna bail them out.
Dodd...he has his hands in the pie. They all do.