1 That didn't take long. The econom

1 That didn't take long. The economy hasn't yet recovered from the implosion of risk investments that led to the worst recession in decades-and already some of the world's biggest banks are peddling new generation of dicey products to corporations consumers, and investors. 2 In recent months such big banks as Bank of America, Citigroup, and JPMorgan Chase have rolled out new-fangled corporate credit lines tied to complicated and volatile derivatives. Others, including Wells Fargo and Fifth Third, are offering payday-loan programs aimed at cash-strapped consumers. Still others are marketing new, potentially risky "structured notes "to small investors. 3 There's no indication that the loans and instruments are doomed to fail. If the economy keeps moving toward recovery, as many measures suggest, then the new products might well work out for buyers and sellers alike. 4 But it's another scenario that worries regulators, lawmakers, and consumer advocates: that banks once again are making dangerous loans to borrowers who can't repay them and selling toxic investments to investors who don't' understand the risks- all of which could cause blowups in the banking sector and weigh on the economy. 5 Some of Wall Street's latest innovations give reason for pause. Consider a trend in businessloans. Lenders typically tie corporate credit lines to short-term interest rates. But now Citi, JPMorgan Chase, and BofA, among others, are linking credit lines both to short-term rates and credit default swaps (CDSs), the volatile and complicated derivatives that are supposed to act as "insurance" by paying off the owners if a company defaults on its debt. JPMorgan, BofA, and Citi declined to comment.6 In these new arrangements, when the price of the CDS rises-generally a sign the market thinks the company's health is deteriorating-the cost of the loan increases too. The result: The weaker the company, the higher the interest rates it must pay, which hurts the company further. 7 The lenders stress that the new products give them extra protection against default. But for companies, the opposite may be true Managers now must deal with two layers of volatility both short-term interest rates and credit default swaps, whose prices can spike for reasons outside their control.