Too Big To Fail Casino Banks Make $518 Billion Bet On PIIGS

The "Too Big To Fail Banks" are at it again, making huge speculative bets on the odds of sovereign default by Portugal, Italy, Ireland, Greece and Spain. The costly lessons of the derivatives debacle of 2008 have apparently been forgotten.

In 2008, the Too Big To Fail banks bought massive amounts of credit default swaps (CDS) to protect themselves from loss on their huge holdings of subprime mortgages. By purchasing CDS from institutions such as insurance giant AIG, the banks were able to convince regulators that their net exposure to losses on holdings of toxic mortgage instruments was minimal. So how did that work out?


As the mortgage market collapsed in 2008, AIG's payoff liability on the CDS it wrote soared. AIG was forced to post additional collateral with counterparties as its credit rating was downgraded and the company faced collapse. If AIG had been allowed to collapse, the too big to fail banks who thought they were hedged, would have instead faced losses in the hundreds of billions. The failure of AIG would have resulted in huge losses to the banks and AIG bondholders.


http://problembanklist.com/to-big-to-fail-casino-banks-make-billion-bet-on-pi...


http://www.rumormillnews.com/

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