By Danielle Douglas,
Published: June 21 E-mail the writer

The exotic financial products that nearly crippled the economy in 2008 are roaring back at the nation’s biggest banks, according to data released Friday that reform advocates worry come just as regulations to rein in risky trading are being weakened in Washington.

Demand for derivatives — contracts whose value is derived from stocks, bonds, loans and currencies — is growing as investors and corporations try to lock in low interest rates. But critics worry that there are too few rules to protect taxpayers from a market dominated by a handful of banks.

On Friday, the Office of the Comptroller of the Currency reported that banks pulled in $7.5 billion in revenue from trading derivatives in the first three months of 2013, a 7 percent increase from the corresponding period a year ago, and a 72 percent jump from the fourth quarter of 2012. The face value of the derivatives held by banks rose 4 percent over the prior year to $231.6 trillion, according to the report.

“The improvement in the U.S. economy and low interest rates led to significant capital-raising activity in the bond markets,” said Kurt Wilhelm, director of the OCC’s Financial Markets Group. “That led to strong client demand for risk-management products as investors increased their hedging and positioning against potential changes in monetary policy.”

In the run-up to the financial crisis, Wall Street firms used complex forms of derivatives to place risky, and ultimately fatal, bets on the mortgage market. Insurance giant American International Group, for instance, teetered on the brink of bankruptcy in 2008 because of its exposure to complex derivatives known as credit-default swaps.

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