Good, someone needs to regulate them. Anne Flaherty of AP reports Pres. Obama wants Treasury to take the job. This was a major flaw in 1999's Gramm-Leach-Bliley Act, which partially repealed 1933's Glass-Steagal Act. The Glass-Steagal part was fine, removing the barrier between retail and investment banks. Turning the Fed into a "superregulator" overseeing all financial transactions was also a good move. But explicitly exempting security swaps and their derivatives was a very, very bad move. Equally bad was the decision to leave out tighter mortgage standards.
Sen. Gramm and Pres. Clinton have defended GLB, saying it didn't have anything to do with the current financial crisis. They're wrong. By refusing to restrict lending standards, and by refusing to regulate credit default swaps and their derivatives, the stage was set for both the biggest financial boom in recent memory and also the biggest disaster.
So regulation is overdue. But there are some questions to ask before proceeding. First, why Treasury? Why not the Fed? Second, how will this affect securitization? Much of the financial world depends on securitization: slow it down and you slow down global finances. (BTW, I'm not saying that's necessarily bad.)
Third, do we really need to regulate all derivatives? The melt-down sprang almost exclusively from consumer loan derivatives (the notorious credit default swaps and CDO's). I haven't heard that other derivative types (commodities, equities) have caused nearly as much of a problem.
(h/t Insta, who doesn't like the thought of Geithner being in charge of this.)