THUD! That’s the sound a busted derivative trade makes when it lands at the courthouse steps.
It’s still not clear if the Obama administration has a plan for dealing with the derivatives monster, which is one of the biggest problems regulators must confront in dealing with the potential collpase of a “too big to fail” financial institution.
Discount brokerage Charles Schwab may be facing a Lehman-sized headache.
It appears some Schwab brokers were actively selling so-called structured notes–derivative-like investments–that were issued by the now bankrupt Lehman Brothers. The structured notes were pitched as principal protected, meaning investors might not make a lot of money if a strategy failed, but they wouldn’t lose their initial investment either.