One of the keys to understanding the crisis of the markets that affects the world in recent weeks has to do with the uncontrolled growth of financial derivatives.

Derivatives are contracts created to reduce losses on investments and their values are based, i.e. "derive", from some type of asset such as stocks, bonds and commodities.

These contracts allow large corporations and financial institutions to take on greater risks than they would commonly expose themselves, for example by issuing mortgages or corporate debt.

As derivatives are marketed, the risk is limited but, at the same time, the number of participants that would be exposed if problems arise.

These instruments were born just over two decades ago and grew out of the regulation proposed by leading figures in finance, such as George Soros, to the General Accounting Office itself, the American equivalent of the National Audit Office.

As early as May 1994, GAO stated in a report the "concern" of Congress and federal regulators for "derivatives growth and its complexity", and the risks they could cause to the financial system, investors and US taxpayers

Concerns surfaced at the same time reports were being made of "large investor losses, some for hundreds of millions of dollars." The GAO called for "consistent standards of account and capital surrender" because, with more information on money placements, including data on earned and lost income by product class, regulators would be better prepared for emergencies, and "international cooperation to harmonize the regulation of derivatives" would be encouraged.

Less than a month after the Watchdog report, the International Association on Derivatives and Swaps (another financial instrument to reduce investment risks), responded to the US agency saying that while its information and suggestions were "useful and valuable, were not validated in the facts, "and that following such advice" would lead to increased costs and reduce the availability of derivatives."

Among other recommendations, the GAO sought to extend the basic regulation on that part of the financial market, "prudent corporate governance" to an uncontrolled business space such as derivatives, "improve banking regulation" of those who traded contracts and "increase account surrenders for the most important end-users of complex derivatives."

When the derivatives arose two decades ago, their impact on the market was practically insignificant, but in 2002 the volume of operations amounted to $106 billion. Until the recent crisis, the contracts moved about $531 billion.

From 1994 to September 2008, the GAO published 34 reports highlighting the risks that the lack of control and regulation over the growth of derivatives would cause in the financial world and the US housing market.