Wednesday, November 4, 2009
Interest rates are the trigger
The current notional value of derivatives on US commercial banksâ€™ balance sheets is $203 trillion. 97% of these ($196 trillion) sit on FIVE banksâ€™ balance sheets. If 4% of derivatives are â€œat riskâ€ and 10% of those bets go bad, youâ€™ve wiped out ALL OF THEIR EQUITY and they go to ZERO.