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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Mike M2 who wrote (53415)	3/25/1999 1:02:00 PM
From: accountclosed	Respond to of 132070

Mike, I think there is some truth in what you are saying. However I think it is important to be cautious in understanding where the dangers are and where they aren't. Derivatives aren't just bad per se. Large parts of delta neutrality are truly neutral. Much is not otc and takes place on regulated exchanges with strict margin requirements. If you feel those margin requirements are not sufficient, that is an issue for debate but still doesn't mean the whole issue is so simple that derivatives are dangerous. Lots of otc derivatives take place with very strong counterparties. This is an issue I brought up with Henry. To what extent did banks do due diligence on their counterparties. I agree that LTCM is worthy of mention. I think it should have failed to keep the marketplace more free of moral hazard which would tend to cause people to say "why do my homework, the fed is always there". However the real deal is that parties should be doing their due diligence on their counterparties. Are reckless bets placed in derivative markets? Certainly. But so too, any market. Just go check the Dell thread <g>