Enron is not the problem

The future of man is intricately entwined with our technological advances. Those advances will continue to change the way we do business. If we are to stay abreast of the future, we must embrace this change and harness its momentum.\nThe rapidly advancing future of finance might not be bright. Indeed, it might be an impending disaster.\nOur financial system has been altered entirely by the advent of computer technologies. Because of these machines, our global fiscal network now is united in a manner that is entirely unprecedented. It is not entirely known what will happen in our markets, but certain trends are emerging that suggest the future might be somewhat bleak.\nProfessor Frank Partnoy, of the University of San Diego School of Law, in his book "Infectious Greed," says, "the truth is that the markets have been, and are, spinning out of control."\nWith the market system as it is today, monies that have been trusted to financial firms can be lost because of the actions of a single rogue trader. This solitary individual can fold a firm and all of the trust that has been placed into it by its investors.\nA decade and a half ago, Andy Krieger flew in the face of existing theory and began using derivatives. These derivatives could be used to legally corner a particular market and put pressure on the price of the investment in question.\nDerivatives are -- by their very nature -- highly risky. Yet it is precisely because of the lottery stakes that traders are attracted. However, as with any gambling venture, the losses can be tragic.\nNicholas Leeson, a newbie trader who was lured into derivatives because of their potential results, turned the $30,000 loss of Barings Bank in England into such a catastrophic failure that the entire firm that employed him collapsed.\nSeeing the threat of derivative losses, the government has instituted a few safety measures. These measures provide some insurance for the long term investments to "bail-out" major financial institutions. This logic, however, has failed me. I see it as a perfectly rational thing to engage in high-risk activity if there exists protection against the worst-case scenario.\nIf it is indeed the case that the leading financial intuitions agree with my reasoning, we should not be surprised by the meltdowns of Enron, WorldCom and Global Crossings. They were inevitable. They are not singular events that exist isolated from each other. They are part of a systemic failure in our financial system.\nDerivatives must be regulated, before they regulate us.