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  • April 21, 2010

    Clearinghouses Are the Answer

    Complex derivatives should be regulated like commodity futures.

    By Gary Gensler

    In September 1998, I travelled to Greenwich, Conn., to meet with Long-Term Capital Management, which was on the brink of failure. The highly leveraged hedge fund was dangerously interconnected to numerous financial institutions through its $1.2 trillion derivatives book. I was sent by the Treasury secretary to figure out the answers to two questions: What would the contagion from LTCM's failure mean for the broader economy? And was there anything the federal government should or could do?

    The truth was that I did not have good answers for the secretary on either of these questions.

    Ten years later, another Treasury ...

    Read Full Article on The Wall Street Journal Online (Subscription Required).

    Last Updated: April 21, 2010