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$62 trillion in credit default swaps exist v. $700 billion bailout?

Posted by TonyB • 9/28/08 • Subscribe to this Discussion [RSS] • Report This Topic
Topics: aig, bear stears, credit default swaps, financial crisis, goldman sachs

Credit default swaps are the instruments caused the bailout of AIG and Bear Stearns. There are $62 trillion of these things outstanding.

How much of this $62 million is covering bad debt?

Doesn't it seem like the actual financial damage could be fargreater than the $700 billion that is being used to bailout Goldman and other financial institutions.

User Comments

9/28/08

Anok

Well, yeah - but I think they are aiming at numbers that will get the job done - not the whole package.

[reply]
1. 9/29/08
  
  TonyB
  
  Though if you've got a pile of doodoo putting a few roses on top won't make it smell any better.
2. 9/29/08
  
  MidwestMom
  
  Will scooping away the doo doo with a teeny tiny pooper scooper do the trick, little dog?
9/29/08

gmoney

700 billion is more or less what is needed to cover the foreclosure market

[reply]
1. 9/29/08
  
  TonyB
  
  And the foreclosure market is only the tip of the iceberg. The derivative swaps multiply the foreclosure many times over.
9/29/08

xmarks

the bailout doesn't need to cover all of the bad debt. It just needs to provide enough confidence the private money starts going back to work.

[reply]
1. 9/29/08
  
  TonyB
  
  $700 billion is likely a band aid on a much larger problem. It may calm the markets briefly and the dominoes will likely continue to fall and cause panic again.