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View Diary: Lawmakers Probe $75T Derivatives Dump by Bank of America (238 comments)

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  •  I read the analysis you link to. (2+ / 0-)
    Recommended by:
    CupofTea, blueness

    I also have a stack of analysis with a different view, such as the one published at CNBC, below. If you watch the action of the players involved (ie. B of A shoving Merrill Lynch into FDIC protection -- and Chase doing the same) one must take this into consideration, as well. Apparently, the exposure is enough to take down both of those divisions:

    Greece—This is Getting Ridiculous!

    Each time that Greek economic news roils, regulators affect worried looks and promise to give the whole mess the most serious consideration tomorrow, or next week, or next month.... we think it’s worth reviewing what a default may mean.

    It is unique to be concerned about the counter-party risk of sovereign debt, but that’s where we are.

    While European banks and governments hold most of the actual Greek bonds, brilliant US bankers have insured Greek bonds against default by writing – you guessed it – credit default swaps.

    Estimates for the dollar liability of US banks exceed $100 billion. This odd situation not only cries to heaven, but, as our friend John Mauldin points out, pits the interests of EU bankers against US bankers. If there is a slow, work-out solution, European banks will suffer and US banks won’t have to pay for defaults. On the other hand if Greece defaults, US banks will be on the hook for making many of the EU banks almost whole.

    It is tough to tell how a Greek default will ripple through world markets, but it will not be good. It is clear that, once started, this type of contagion can quickly spread to the other European economies we discussed earlier. It is confounding that US banks may soon again seriously suffer from ill-considered risk taking.

    The [US] bankers that decided to write the credit default swap on Greek bonds should be fired in a very public way. The banks that endorsed these swaps should be held accountable by their shareholders. We don’t need government stress tests; we need sensible people to begin doing responsible things.

    This is getting ridiculous!

    http://www.cnbc.com/...

    •  Even if it's 100 billion though (0+ / 0-)

      it still pales in comparison to the amount that will be lost in trading with Europe in the event of a euro collapse. That should be more of interest.

      I would also mention this: the latest BIS report shows bank exposure to Greece being reduced in German/French banks from 65 billion to 20 billion.

      In other words, a significant portion of the debt has been repaid, so a portion of the CDS has also been retired.

      If you're concerned with CDS worries, be more concerned about many failing banks as a result of a total euro meltdown.

      There are two kinds of people in this world. The kind who divide the world into two kinds of people, and the kind who don't.

      by upstate NY on Tue Nov 01, 2011 at 12:00:52 PM PDT

      [ Parent ]

    •  The money quote of the thread. (1+ / 0-)
      Recommended by:
      Pluto
      The [US] bankers that decided to write the credit default swap on Greek bonds should be fired in a very public way. The banks that endorsed these swaps should be held accountable by their shareholders. We don’t need government stress tests; we need sensible people to begin doing responsible things.

      This is getting ridiculous!


    •  I'm not so inclined to buy CDS analysis from (1+ / 0-)
      Recommended by:
      Pluto

      CNBC, home of the bright shiny object as news.

      •  I know, johnny. (1+ / 0-)
        Recommended by:
        blueness

        I get my news where I can, and most of it is not from the internet.

        I'm pretty sure how the game will end, but I'm not certain at all of the long and winding road that's going to take us there.

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