X Rated: A twelve minute video primer on derivatives and credit default swaps

Wall Street’s Shadow Market – CBS 60 Minutes, October 6th, 2008

Recommended.

For lawyers there is good news and there is bad new. The good news is that none of the experts interviewed mentions lawyers or law firms.  The bad news:  the experts make repeated references to complex instruments being at the heart of the problem.  For example, credit market expert Jim Grant:

“The instruments themselves are at the heart of this mess,” Grant says. “They are complex, in effect, mortgage science projects devised by these Nobel-tracked physicists who came to work on Wall Street for the very purpose of creating complex instruments with all manner of detailed protocols, and who gets paid when and how much. And the complexity of the structures is at the very center of the crisis of credit today.”

“People don’t know what they’re made up of, how they’re gonna behave,” Kroft remarks.

“Right,” Grant replies

Assuming lawyers drafted the instruments that constitute, in Grant’s words, “mortgage science projects,” did they, the lawyers, understand the instruments they were drafting?  Does the answer matter?

The CBS transcript of Wall Street’s Shadow Market can be found here.