I'll list some examples in the field of financial derivatives (speaking here in my personal capacity, not an expert, this is not advice, disclaimer disclaimer disclaimer):
* An oil production company knows they can comfortably operate at a particular price level, P/BBL. They're willing to forego any additional profits provided they can guarantee receiving P/BBL. Commodity swaps make this possible, and it means that people in the industry get to have a reliable job despite the volatility in the market.
* The national airline of a small, poor developing country depends on tourists buying plane tickets in a foreign currency, often months in advance. How can they manage the risk of the exchange rate volatility, when one of their biggest costs are fuel and they have to pay this in yet another foreign currency? Currency derivatives make this possible, and it means this developing country can reliably operate an airline and thereby receive an economic boost from tourism, helping at least some of its citizens make it through another day.
* The CEO of a F500 company knows some bad news is about to hit the market and negatively impact the value of his stock. But he can't sell his shares because he'll be guilty of insider trading. Instead he enters into an equity swap arrangement with some poor sucker who doesn't know about this bad news, and because it's a pre-Dodd Frank Act deal, nobody is the wiser, and our CEO gets to enjoy another stress-free day on the golf course.
As I hope my last tongue-in-cheek example demonstrates, these are just instruments. How they get used and abused is a problem for regulators; they are not inherently evil.
Guns are just tools that poke holes in things. We can't hold the manufacturers responsible for the way they get used.
Fentanyl is just a medical drug. The pharma companies aren't responsible for addiction.
I don't even disagree with your sentiment and I don't necessarily agree or disagree with my silly examples. But I hope you can see why some people would see calling them 'just instruments' can come across as washing ones hands from any responsibility.
I'm not sure you were following the point. It was about the culpability of the manufacturer/creator. In your example, it would mean Dell should shoulder some responsibility for somebody misusing their product. The fact is some people think use/trading of certain financial tools should be illegal and that those who caused problems with them should be held responsible. I'm not sure where that line is for financial tools but we already have guardrails in other areas of society to address similar concerns.
IMO, the culpability of the manufacturer should be zero for general purpose tools. For things like guns/weapons, which were invented solely for killing living things, you can make an argument for regulation...
>The fact is some people think use/trading of certain financial tools should be illegal and that those who caused problems with them should be held responsible.
I don't think its right to base any argument simply on what "some people" think. Why not instead, list the pros and cons of the tool, and what you would change?
FWIW on your second point, "some" of those people are members of Congress who are meant to represent constituents and draft laws. What you're advocating in listing the pros/cons is a risk based approach, which is the way most decisions, including these, should be framed.
- borrow some money, use it to buy a company.
- transfer the debt onto the company. Now, somehow, you own the company but paid nothing for it.
- break up the company, sell off the parts, keep the money. The company goes bankrupt and the original lenders get nothing
- repeat. Bizarrely you can keep on doing this over and over again, people will still keep lending you the money!
The other... EAK Ramen in NYC (small chain that landed here a couple of years ago out of LA so I'm sure it is financial engineering at work, not just an owner experimenting). They removed what used to be a standard part of the ramen that came with it ( egg, some toppings ) and started offering removed parts as "customize your own ramen! Add an egg for a $1! Add corn for a $1! Add X for a $1 ) as a way to raise prices by wrapping that into "customization". As if their customers are stupid and don't notice that the same ramen now costs not $14 but $18.
In many cases the finance guys have (legally?) embezzled large amounts of money while loading the companies with debt and then dumped them, leaving customers, employees, suppliers, and other investors holding the bag.
I’m sure this process is considered to be “sound financial management” by some.