A derivative has no intrinsic value in itself. Derivatives are financial instruments whose value is derived from the value of something else. They usually take the form of contracts under which the parties agree to payments between themselves based upon the value of an underlying asset, index, interest rate, or other data at a particular point in time. Derivative transactions include a variety of financial contracts, including structured debt obligations and deposits, swaps, futures, options, caps, floors, collars, forwards and various combinations of these. For example: Choose something valuable such as soy beans, petroleum or government bonds, make bets on its future worth, add a contract, and you have a derivative. Derivatives have been called the unregulated global casino for banks. The financial crisis showed that derivatives make the system much more dangerous by encouraging banks and investors to pile up more and more risk. A derivative contract loses or gains value as the price it tracks changes. When it loses enough value, the bank will demand that the owner pays it some money, the dreaded “margin call.” This was exactly what brought down AIG and nearly did the same to our global economy. Advocates say that a small tax on financial transactions would discourage rampant speculation by our financial institutions. Such a windfall could be used to provide services to people, make infrastructure improvements, and help reduce our budget deficit.

Pending Legislation:
H.R.1167 - Markets and Trading Reorganization Act

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Poll Opening Date
May 21, 2020
Poll Closing Date
May 27, 2020

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