Daniel Altman, author, economic journalist and Huffpo blogger, from "Contracts So Complex They Imperil The System", February 24, 2002
When companies that rack up huge hidden debts and traders who illicitly amass mountains of risk are exposed, Wall Street's big players rush to cut their losses and collect on their debts. If that kind of rush were ever to result in a shortage of cash, it would paralyze the financial system. Stock markets would tumble and banks would close, putting the savings of households at risk.
and from "Derivatives: Corporate Financial Leverage Wrapped in Enigma," June 11, 2003
''The abuse of derivatives could lead to accounting irregularities or practices that are not in the best interest of shareholders,'' said Cheryl Gustitus, vice president for communications of Institutional Shareholder Services. Because of their complexity, Ms. Gustitus said, ''the impact of derivatives would not be obvious to the average investor.''
Nor, it seems, would it be obvious to many chief executives. Their understanding of derivatives has grown along with the popularity of derivatives in corporate finance departments, but apparently not enough to stave off trouble.