To: yard_man who wrote (6208 ) 1/26/2004 12:54:12 PM From: mishedlo Read Replies (2) | Respond to Remarks by Chairman Alan Greenspan For the most part, we in the United States have not engaged in significant and widespread protectionism for more than five decades. The consequences of moving in that direction in today's far more globalized financial world could be unexpectedly destabilizing. Financial derivatives, more generally, have grown throughout the world at a phenomenal rate of 17 percent per year over the past decade. Conceptual advances in pricing options and other complex financial products, along with improvements in computer and telecommunications technologies, have significantly lowered the costs of, and expanded the opportunities for, hedging risks that were not readily deflected in earlier decades. The new instruments of risk dispersion have enabled the largest and most sophisticated banks in their credit-granting role to divest themselves of much credit risk by passing it to institutions with far less leverage. Insurance companies, especially those in reinsurance, pension funds, and hedge funds continue to be willing, at a price, to supply this credit protection, despite the significant losses on such products that some of these investors experienced during the past three years. federalreserve.gov
