Treasury Secretary Timothy Geithner is pushing the Obama administration's plans to regulate the exotic and opaque derivatives market, something that's long overdue. Let's face it, the US Government wasn't even aware of how serious a problem it's been. Associated Press reports that Geithner admitted derivatives had blindsided the Government.

The derivatives market underpinned the shadow banking system which helped destroy companies like AIG and caused so much damage to financial markets around the world.

The derivatives market now dwarfs the global economy. London-based investment consultancy Independent Strategy developed a huge inverted pyramid of global liquidity. A tiny triangle of bank power money sits at the bottom of the pyramid, representing about 10% of global gross domestic product. Sitting up the top are the derivatives, representing 802% of global gross domestic product. Still, there's a lot of work to do and the proof of the pudding will be in the eating.

As the New York Times reports, Geithner has not provided us with any details as to how the administration will define derivatives. Perhaps they're still working it out. In the meantime, the the big banks like Credit Suisse are now pouring in money to stop the US administration from bringing derivatives under control.

Bloomberg reports that derivatives have provided as much as 40% of the profits of the banks.