But the most esoteric derivatives - which also are the most profitable for banks to create and trade - have little economic purpose other than to let investors place financial bets, critics say.

A more complex type of derivative helped to inflate the housing bubble in recent years, as Wall Street repackaged high-risk mortgages into securities that speculators could use to bet on the direction of the housing market. Financial institutions earned millions of dollars in fees for creating the securities. But many of the derivatives became worthless when foreclosures skyrocketed, leading to billions of dollars of losses - and taxpayer bailouts - at the banks and insurance companies that owned them.

Now, these obscure and largely unregulated securities - more than $600 trillion of which are tucked into investors' portfolios, according to the Treasury Department - are at the center of the fight over financial reform led by the Obama administration.