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Why Wall St. Needed Credit Default Swaps [View article]
The Fed: On the Cusp of Moral Hazard [View article]
Fed's rescue halted a derivatives Chernobyl
www.telegraph.co.uk/mo...
The Fed has torn up the rule book, take a look at the latest Security and Exchange Commission filing by Bear Stearns. It contains a short table listing the broker's holding of derivatives contracts as of November 30 2007.
Bear Stearns had total positions of $13.4 trillion. This is greater than the US national income, or equal to a quarter of world GDP - at least in "notional" terms. The contracts were described as "swaps", "swaptions", "caps", "collars" and "floors". This heady edifice of new-fangled instruments was built on an asset base of $80bn at best.
The same leverage can be found all over Wall Street.