Fun fact of the day - JP Morgan has 90 Trillion dollars worth of notional derivative exposure. Yes that is 90 Trillion with a T. (The US GDP is supposedly around 14 Trillion.) Another fun fact, when JP Morgan took over Bear Stearns they inherited the Bear Stearns counter parties. Bear Stearns had 5000 counter parties in their CDS portfolio alone, yes 5000 of them.
This is Insanity!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
To really fix the financial mess, the Feds are going to have to declare these things null and void. And take other extraordinary measures that no one is going to like.
Obama's challenge is to dismantle this house of cards without the whole thing falling apart. The fact that these companies were unregulated and too big to fail, is an outrage from the Bush years and the Republican control of Congress. The Democrats are not blameless though. These companies wired themselves up in such a way as to be impossible to take down without risking the entire US economy.
Maybe one day we will have an economy that actually produces something the world wants to buy. Until then, our economy is under stress every time we export cash to pay for imported oil. Our oil imports are the number 1 reason we are dependent on the rest of the world.
To fix this economy for the long term we need to get off imported oil asap. Until that day, any financial collapse risks the US not being able to pay for imported oil which would bring the real economy to a grinding halt.
From the Telegraph:
http://www.telegraph.co.uk/...
"Under the rescue deal, JP Morgan Chase will take over Bear Stearns' $13.4 trillion contracts - lock, stock, and barrel.
But JP Morgan is already up to its neck in this soup, with $77 trillion of contracts. It will now have $90 trillion on its books, a sixth of the global market."