Additionally, the SEC voted unanimously in 2004 to remove the capital reserve requirements for the biggest broker-dealers. So when their derivatives shit ultimately blew up in their faces, NONE OF THEM had had any cash reserves to cover their losses. And we all know what happened to Bear Stearns, Merrill Lynch, and Lehman Brothers as a result.
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Yes. They were bailed out by the Bush and Obama Administrations.
The cause of the crash was not derivatives. That was only later. The cause was bad mortgages made because the Fed kept rates too low, making mortgage loans very attractive to lenders. That is the only "regulation" that can be blamed.
You clearly do not understand the role of derivatives. And you smell funny.
I understand derivatives and you're wrong. The derivatives that brought down the economy were stuffed with bad mortgages that Wall Street filled structured product with. That's why investment banks went into subprime origination to begin with, so they could have a study supply of inventory to package into structured products and sell to investors. This demand was a big reason why underwriting standards fell.
I am not wrong. The derivatives simply magnified the effect of making mortgages in the first place. But the base problem was low rates by Fed encouraging the high margin that mortgage lending provided. Derivatives increased the leverage of those mortgage blocks, increasing the destruction when they inevitably went bad.
The derivatives were not to blame.