tbob

Banks Worth Next to Nothing, Bernanke Has No Solution

Close, but CDO's aren't the real problem. The true fear should lie in the credit default swaps. With all sorts of obligations between parties and counter-parties a major failure of just one institution could bring down the house of cards. With hegde funds using swaps to gamble on who will fail, the whole derivative market could have the tail wagging the dog real soon. The true problem is excess liquidity in hedge funds chasing yields. Pumping more liquidity into the market will only make the problem more severe. The FED has to let the whole derivative structure unwind then pick up the pieces.