Henry Paulson, while at Goldman Sachs, was apparently involved, present with the creation of every type of derivative known to man....therefore, the most credentialed person to serve as US Treas Sec. The first hedge fund, in London, was estb by a Goldman Sachs person who went to London to begin the experiment ...the rest is history. Goldman Sachs is at the epicenter of the derivative world. Lehman later took on the mantle of having the greatest involvement with credit default swaps. All the bad stuff strangling the world was an American invention, augmented by all the central banks of the industrialized world jumping in.
October 2008 is a big month, in the midst of worldwide crisis, for a formal test of credit default swaps: Freddie and Fannie will be settled on 6 October, with Lehman on 10 October and Washington Mutual on 23 October. Much rides on the results.
Lots of excellent posts on this thread. Several have alluded tot the AIG $85 billion bailout. I have read further explanations in the last few days noting that Goldman Sachs had a $20 billion exposure if AIG failed, and that a crisis at GoldmanSachs was avoided by the bailout.