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Politics : View from the Center and Left

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To: Steve Lokness who wrote (90879)	10/20/2008 2:57:22 PM
From: Dale Baker	Read Replies (1) of 541119

Most of the derivatives don't come into play unless companies and their debt issues are going bankrupt; even then, most institutions trading in them offset risk in one derivative with a hedged derivative with someone else. So as we should find tomorrow, the Lehman blowup didn't create the huge dislocation the market feared when they just looked at the notional values. The hundreds of billions in the TARP fund are aimed at shoring up the firms and securities that derivatives are based on. So by protecting a small x% of the system, you stop a fire from breaking out in a much larger part. I don't want to bore everyone here with more details on this. There is a lot of media coverage on the whole thing if you want to read up more.

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