Many an aam aadmi is perhaps confounded by the financial mess the world is now in and is also equally blank on products like derivatives and CDOs that were structured and sold by some of the most “qualified” executives earning very high and perhaps indecent salaries and bonuses. Well, let’s make derivatives simple. Dahi, cream, paneer and khoya are the first derivatives of milk. Shrikhand and lassi are the first derivatives of dahi and the second derivatives of milk. Similarly butter and butter milk are the first derivatives of cream and the second derivatives of milk. Ghee is the first derivative of butter, the second derivative of cream and the third derivative of milk.
No matter how far up the ladder you go, a derivative can never be qualitatively better than what it is derived from, whether it is milk or a financial product. One can go even further and state that the quality of milk depends on the breed and maintenance of the cow/buffalo and the ‘watery’ integrity of the doodhwallah. The same is the case with the CDOs and other convoluted products that toppled 150-year-old institutions. Milked from sub-prime loan books, they were further ‘adulterated’ by analysts who sang their praises, auditors who closed their eyes and the biggest adulterers in the financial milking industry — the rating institutions. We shall soon see some of these financial doodhwallahs in jail if we are to restore the confidence of the market.
T R Ramaswami, Mumbai
