Not to blindly defend companies that have invested heavily in derivatives that in 2002 Warren Buffett called “financial weapons of mass destruction”; but in the next six years, these financial WMDs grew by 500 percent to more than $500 trillion. The sheer size of these derivatives has greatly increased the risks of catastrophe, and the danger is further elevated because of FAS 157 and Sarbanes-Oxley.

Sarbanes-Oxley was in response to ENRON, TYCHO, etc.

FAS 157, the fair-value rule, requires that certain assets of financial companies be marked to market, or valued at a price they could attract in the open market. The rule has drawn fire from some securities firms and banks who contend that prices are nearly impossible to estimate for some structured securities that have no market. They have also argued that the rule has led to an overstatement of problems at investment banks.

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