And then:

Bankers complain that recent cases of companies that lost millions of dollars on soured derivatives deals have received widespread coverage, while stories about companies that made money on derivatives seldom get written.

And Reuters, the same day, gave us anonymous criticism:

A major U.S. report warning that trade in financial derivatives poses a dangerous threat to the international financial system is exaggerated, a senior European monetary source said.

The source, close to international banking regulators, told Reuters that the report’s proposals for tougher regulation of trade in derivatives would plug some supervisory loopholes but not all of them were feasible.

The Chicago Sun Times weighed in, again May 19, with the “defenders” of derivatives:

In response to a long-awaited federal government report on derivatives, leaders of Chicago’s futures markets warned against further regulation of the financial instruments.

‘We would rail against any additional regulation,’ said Jack Sandner, chairman of the Chicago Mercantile Exchange. ‘No one has made a case that there’s a catastrophe here.’

Perhaps he didn’t read the GAO report. And yet again, it is beyond misleading to present the opinions of industry executives and the research of the GAO as equally authoritative, as this piece does.

Some more false balance, this time from the WSJ, May 19 again:

A federal study calling for tighter controls on the derivatives market was sharply criticized by the securities and commercial banking industries, which said the proposals would increase costs and reduce the availability of such financial products.
The General Accounting Office, Congress’s investigative arm, formally released its long-awaited study yesterday, calling for formal regulation of securities dealers and insurance companies that deal in derivatives, as well as for improved disclosure and accounting treatment. The report says that gaps in financial regulation could lead to a system-wide problem—and perhaps a federally financed bailout—if a major dealer fails. And it says the Securities and Exchange Commission should demand that public corporations establish requirements for corporate audits.

‘We are convinced that any legislation having these effects will harm the American economy,’ six leading financial trade associations said in a joint statement. ‘Therefore, we strongly oppose such proposals.’

The Globe and Mail May 20 brought up charges of politicizing the issue, in a piece headlined “Derivatives Backlash Overdone” and based on rumor:

A call for broad regulation of the booming financial derivatives market by an arm of the U.S. Congress is a highly political document, not an objective academic study, the president of Swiss Bank Corp. (Canada) said yesterday.

‘We are informed that the original draft, when it was sent to the politicians who commissioned it, was rejected … they just said it’s not negative enough,’ Malcolm Basing said of a report released in Washington on Wednesday by the U.S. General Accounting Office.

‘That gives you a flavour of what is going on,’ Mr. Basing, a past chairman of the International Swap Dealers Association—the key derivatives trade association—told a conference on derivatives.

The Washington Post’s editorial page seems not to have read the actual report, because it is hard to see how a reasonable reader could emerge with the following conclusion:

Derivatives have come to symbolize everything that Washington finds spooky, incomprehensible and menacing about the financial markets. Congress, bruised by the costs of cleaning up the S&L fiasco, wonders uneasily whether the rapid growth of trading in derivatives will produce similar grief. At its request the General Accounting Office has published a report that is, on the whole, reassuring. It suggests some improvements in regulation but rings no alarm bells. As it says, derivatives serve a very useful purpose.

If this were the obvious reading of the report, the derivatives industry would hardly have been so up in arms about it.

Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.