SDR: The notional trading value of derivatives world-wide is absolutely staggering. Somewhere in excess of $600 trillion (yep, trillion).
I have to believe that Bernanke, Paulson and that whole Wall Street cabal are terrified of having to come completely clean on actual “mark to market” (what those derivatives would bring in real dollars) value versus letting them remain on a “mark to model” valuation (what the investment houses and banks can claim they’re worth).
If recent activity is any indicator (like E-trade’s sale), there are huge discrepancies in the two valuations. Coming clean with a real-world valuation would probably put several banks out of business, as they lack the capital base to cover the losses. Think Citi, Bear Stearns, Merrill, etc. Even banks like Wells Fargo that had fairly strong underwriting protocols in place and avoided much of the sub-prime debacle would get hit due to investing in these (CDO, CDS) type products.
