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February 22, 2010

Cover Sidebar: A Reform Too Far

By Gregory Bresiger

Goldman Sachs CEO Lloyd Blankfein, in recent remarks, gave an example of what would be too drastic a reform in derivatives clearing and processing.

"If we simply ban customized derivatives to satisfy the perception that everything associated with these markets is bad, we run the risk of limiting risk capital, ultimately reducing capital expenditures, business investments and, ultimately, economic growth ... To me, the right incentives should be at the heart of the reform, and this is particularly true with respect to how non-standard derivatives are managed. Customized derivatives should entail more capital requirements, for example. The pros and cons of buying and selling derivatives on and off an exchange should be immediate and clear to all market participants."

Source: Goldman Sachs  

 

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