re: #52 Obdicut

They have increased exposure to derivatives during many quarters since the meltdown.

[Link: www.occ.gov…]

From that useful link—thank you—dated September 2010:

The OCC reported that net current credit exposure (NCCE), the primary metric the OCC uses to measure credit risk in derivatives activities, increased $38 billion, or 11 percent, to $397 billion this quarter. NCCE peaked at $800 billion at the end of 2008, at the height of the credit crisis, and had declined for five consecutive quarters until the increase this quarter.

If you’re asking for the name of a particular new security, I can’t tell you, that. I’ll happily modify my statement to “They have not reduced their exposure to credit default swaps by nearly enough in the wake of the meltdown.”

In view of the September 2011 press release, that modification moves in a direction I agree with (boldface mime):

The OCC reported that net current credit exposure (NCCE), the primary metric the OCC uses to measure credit risk in derivatives activities, increased $11 billion, or three percent, to $364 billion this quarter compared to the first quarter of 2011. NCCE is less than half the peak of $800 billion at the end of 2008, at the height of the credit crisis. “The rise in the second quarter broke a trend of steadily declining credit exposure numbers,” said Mr. Pfinsgraff, who noted that NCCE had fallen in seven of the past nine quarters prior to the second quarter’s increase. “Based upon the very sharp decline in interest rates since the end of the second quarter, we anticipate a material rise in credit exposures during the third quarter.” Mr. Pfinsgraff noted that aggregate derivative credit exposures are very sensitive to interest rates, since rate contracts are 82 percent of total notionals. He also noted that 73 percent of the NCCE was collateralized, up from 72 percent in the prior quarter. OCC expects to see continued increases in collateralization of derivative risks as more over-the-counter transactions migrate to exchanges in conformance to recent changes in regulation.

This doesn’t sound like a proliferation of “even more complex financial instruments”.