You know Buffett warned about the unregulated derivatives market in 2003.

[sinkingfeeling]

http://opinion.inquirer.net/inquireropinion/columns/view/20080927-163196/When-never-again-became-once-again

"It boggles the mind. The size of the derivatives market — which is at the heart of the current financial crisis in the United States (and other parts of the world) — has been estimated at $450 trillion as of August 2008. This is nine times the total market capitalization (number of outstanding shares x the share price) of all the publicly traded stocks in the world, i.e., the global stock market ($50 trillion) in the same period. More than six times the worldwide assets of the largest 1,000 banks in the world ($74.2 trillion in 2007). And for good measure, more than 14 times the size of the global economy.

He described the risk to the economy as “megacatastrophic,” claiming that the highly complex financial instruments were time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system.

Not one to mince words is Warren Buffett. Sounding like a Cassandra, he also warned that derivatives could push companies into a “spiral that can lead to corporate meltdown,” and even compared the derivatives to hell: easy to enter but almost impossible to exit. His list of the derivatives’ flaws include: some derivative contracts appear to have been devised by “mad men”; they pose a dangerous incentive for false accounting; they generate reported earnings that are often wildly overstated and based on estimates whose inaccuracy may not be posed for many years; large amounts of risk have become concentrated in the hands of relatively few derivatives dealers — which can trigger serious systemic problems.

The irony is that in contrast to the derivatives market, the much smaller stock market and banking system are subject to regulation, the result of bitter lessons learned from the stock market crash of 1929 and the Great Depression (lasting 10 years) that followed. The reasons for the crash were clear: excessive leveraging and inadequate regulation.

[Warpy]

1. I've been listening to unbought economists warning about it

since the 1980s. Nobody wanted to do anything about it while the cash flow was still positive.

I just hope all the jerks and greedheads and do nothings are heavily invested in hedge funds.

[Waiting For Everyman]

2. Void them by law, and move on.

Nothing else is practical or possible. And all players brought it on themselves.