Panel Examines Role of Derivatives in Crisis
June 29, 2010 by admin · Leave a Comment
The complex instruments at the heart of the financial meltdown, and the way two giant companies were wrapped around them and entwined with each other, are being examined by the special panel investigating the origins of the economic crisis.
The Financial Crisis Inquiry Commission is turning its focus to derivatives at two days of hearings starting Wednesday. On the hot seat will be former executives of American International Group Inc., the insurance conglomerate saved from collapse by a $182 billion taxpayer bailout, and current officials of Goldman Sachs Group Inc., the finance powerhouse that has been one of Wall Street’s biggest derivatives dealers.
Traded in an opaque global market valued at around $600 trillion, derivatives have caught a big part of the blame for the financial crisis that ignited in late 2008. The value of derivatives hinges on an underlying investment or commodity — such as currency rates, oil futures or interest rates. The derivative is designed to reduce the risk of loss from the underlying asset.
