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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 382.87-0.8%Nov 13 4:00 PM EST
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To: Cogito Ergo Sum who wrote (81903)10/21/2011 7:55:30 PM
From: Paxb2u  Read Replies (1) of 217752
 
The FDIC covers $250,000 of each individual account. However, if they had not put the risky CDSs into the retail banking portion of the company, it may not fail. By putting them in there they have almost insured its failure. Also, they were able to sell more insurance than the underlying debt was worth. This is because an entity doesn't have to have an interest in the underlying debt in order to purchase the insurance. So, over the past few years, the investment bank part of the corp has collected a lot of cash from these instruments and have off loaded them to the retail bank. Because of the European situation, they would have probably been on the hook for about 60% of each debt instrument they insured. But you have to remember they were able to insure the same instrument multiple of times.So, if they go under, it would probably take the company down. They have put these risky liabilities into the retail bank. Therefore, the Investment Bank has collected all the cash and off loaded the risk to the retail bank. They probably think the retail bank was doomed for failure any way. They don't care if it fails because they probably think they are too big to fail and the Govt will rescue the bank. If the Govt doesn't rescue the bank----so what. They have off loaded all the risk and those who paid for insurance will not be able to collect if the retail bank declares bankruptcy and is not rescued. Nice guys huh?
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