Banks Aren’t Really Much Like Dominoes
| Jun 20th, 2012 | Filed under: Derivatives, Today's Post | By: cfaille |
|
Whether the growth of the credit derivatives market caused or contributed to the U.S. centered financial crisis of 2007-08 is an issue that is already passing into the domains of academic economists and economic historians. But the unquestioning public assumption that the answer is “yes” could yet do some real ongoing harm.
Such an assumption may set the agenda for Europeans, as the solvency of EU banks becomes the big global-financial question of the day. Those who see credit derivatives in particular as on the side of the devils include Frank Partnoy and David Skeel, who even before the crisis hit Wall Street wrote, “Credit derivatives help banks reduce risks but in doing so, they create the danger of systemic market failure.”
To continue reading this article please login (at the right) or click here to learn more about accessing our archives.
Author Bio:
Christopher Faille is a Jamesian pragmatist. William James has taught him, for example, that "you can say of a line that it runs east, or you can say that it runs west, and the line per se accepts both descriptions without rebelling at the inconsistency."
Related Posts
- McMansions Aren’t Bank Accounts: Now What?
- The “first formal analysis of hedge fund leverage” finds it to be “counter-cyclical” to that of banks
- Alpha Hunter Bob Swarup: A World of Wobbling Dominoes
- Two Views on the Banks
- Japan’s Largest Banks Invest in the Solar Industry, Expecting a Huge Boom in 2013
