Readings

Still not sure what a derivative is? The International Swaps and Derivatives Association offers an extensive FAQ page with the basics -- from defining a swap to outlining the risks and benefits of the derivatives market.

How can the derivatives market be worth more than the world's total financial assets?" This Slate article will tell you.

The Washington Post article "What Went Wrong" presents a detailed chronology of what led to the 2008 financial crisis, going back to Brooksley Born's attempts to bring derivatives under control.

Stanford University's alumni magazine profiles her, tracing her career from the undergraduate days and her presidency of the Stanford Law Review, to law firm years and her time at the CFTC. And in this Washington Post profile of the "Credit Crisis Cassandra," Born talks about what it was like to be one of only seven women in her Stanford Law class and why she won't say "I told you so."

Here's coverage of three financial events in the 1990s that signaled the potential pitfalls with derivatives.

Start with these three accounts of Orange County, Calif.'s 1994 derivatives-induced bankruptcy.

And these two stories explain what happened in 1994 when Bankers Trust lost millions of dollars of client Procter & Gamble's money through risky derivative investments. This article explains the settlement that Bankers Trust agreed to after Procter & Gamble sued.

The third event in the '90s was Long-Term Capital Management's near collapse in 1998. The New York Times did an update on that story 10 years later, following the 2008 financial meltdown. Browse the report (PDF) authored by the President's Working Group -- the most influential White House body on financial policy during the Clinton years -- on LTCM's crisis. Their report called for "indirect regulation." Compare it to the Government Accountability Office's summary report on LTCM, which recommended flexible direct regulation.

Here's that 1998 concept release that set Brooksley Born up for a battle with top members of Clinton's economic team over regulating derivatives. This transcript from an address Born gave at the American Bar Association later that year summarizes much of the concept release in more basic language. Following the publication of the concept release, Born testified before Congress in support of regulating derivatives. Federal Reserve Chairman Alan Greenspan, Deputy Treasury Secretary Lawrence Summers and SEC Chairman Arthur Levitt all testified against regulation.

FinancialStability.gov is the main site for information on the Obama administration's efforts to restore the country's economy. It includes useful features like a "decoder" that explains financial terms and a map that allows you to trace what efforts are being made to help your community, plus links to the latest press releases, legislation and testimony related to economic recovery, including over-the-counter derivatives reform.

The latest Congressional Oversight Panel report on the government's attempts to buffer the effects of "troubled assets" left over from the collapse of the derivatives market and the future implications of these assets is available here.

The New York Times offers both a portal page on derivatives and analysis on the topic from Andrew Ross Sorkin's DealBook blog. Other key blogs include the highly-respected Baseline Scenario, naked capitalism and Felix Salmon's analysis from Reuters.