We've learned recently that if it's a "derivative", it's legal, even if it looks like they were just gambling on obscure numbers. If it was really just gambling, then the contracts were probably illegal under gambling laws. That would turn those "financial products group" bonuses into confessions and put the traders behind bars where they belong. But apparently calling their bets "derivative contracts" supposedly made them legal. So legal that Uncle pays off when they lose the bet.
So it's time for Morty the Shark and Lefty and Hoops and all those other neighborhood wise guys to get into the act. Let's open up derivative contracts to the people! I think I've come up with a derivative that even an unemployed American can buy into.
Here's the "contract". It's a derivative, and the financial transaction that it's based on is the daily handle at a racetrack. Since it's a derivative, Gramm's law makes it unregulated, and if AIG's are legal, this should be too. You put down a buck, and specify which of a thousand optional derivative contracts (let's call those "tranches") you want to buy. A "derivative contract" pays you $600 if your tranche matches the low-order three digits in the daily handle. So you bet a buck, er, buy a derivative contract that specifies Tranche 372, and if the day's handle reported on the sports page is something like $7,325,372, then the underlying tranche "defaults" and you get $600 in the "swap". Otherwise I keep my buck.
Sellers of this class of derivative are unlikely to go to the government for a bail-out if your tranche happens to default.