WASHINGTON -- The $1.5 billion in paper derivatives losses suffered by Orange County, Calif., is triggering increased scrutiny by Congress and regulators, including a vow by a top lawmaker to hold hearings early next year on the risks derivatives pose to states and localities.

Sen. Alfonse D'Amato, who will be the new head of the Senate Banking Committee, said Friday that the county's loss "is by far the biggest loss to date from derivatives instruments." The New York Republican said, however, that legislation is not warranted at this time.

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