Another great article, New York Times, Taking Hard New Look at a Greenspan Legacy, which examines the 'legacy' Federal Reserve Chairman Alan Greenspan.
Five years ago, Warren E. Buffett warned that derivatives, complex financial instruments designed to hedge against risk, were "financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal." George Soros avoids using derivatives "because we don’t really understand how they work." And Felix G. Rohatyn described derivatives as potential "hydrogen bombs." It turns out that derivatives are the crux of the current economic mess, and and Greenspan supported and promoted their use.
The article includes a great graphic, Growth of a Complex Market,which shows the growth of the derivative market from $106 trillion in 2002 to $531.2 trillion in 2008 and credit default swaps from $2.2 trillion in 2002 to $54.6 trillion in 2008. Yikes!!
What a mess.