Simon Johnson On Derivatives-A Scary Theory

Simon Johnson has an excellent post on the Baseline Scenario. He uses President Obama’s comment about blogs as a jumping off point for a scary discussion about derivatives.

But the President knows all this, which suggests another interpretation for his remarks.  Perhaps the financial situation – e.g., in and around derivatives – really is too complex for anyone to understand, unless they have the inside knowledge of regulators.  This would mean, of course, that going forward no one can question Treasury about anything important. 

But that, in turn, makes congressional oversight impossible – even if we move to closed door hearings.  And it raises the question: if our financial system has become so economically complex that President Obama is right, then is it also too complex to be politically sustainable?

That’s just a sample. Take a look at the entire post.

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