Why shouldn the OTC swaps/derivatives markets just be entirely shut down?
The OTC swaps/derivatives market clearly needs regulation; however, given non-savvy counterparties like AIG and the systemic risk/tax payer costs as a result – why shouldn’t we just shut these markets down? While such a market may be great for hedging or just making money I would argue that the market poses too much risk to the global financial system. There may be some practical applications that would suffer a bit, but I think we can all live without these markets. Risk also exists with very savvy counterparties such as Goldman or Morgan Stanley. They too can be blinded by greed or just have a market move too quickly in an unanticipated manner and get crushed. LTCM went down in the Asian crisis in the late 90s and although the situation was different, one was dealing with a company that had very capable traders and top notch mathematicians. They were blinded by greed. No one is immune to this. To entirely shut the market may take time, but I say it should still be shut. I haven’t wor
