That is the problem, it could be a minor nuisance, or it could be a disaster, compounding the problem to such a degree that the entire system will simply collapse under the strain, resulting in catipulation. I wonder what Bernenke and Paulson have cooking to avert this disaster.
There is pretty easy solution to this, sacrifice the hedge funds and bail out the pension/mutual funds.
Just give priority to CDS’ held by government and public entities first. They get first dibs at whatever equity is left by the bond insurers and the Fed prints out the rest to make good on whatever obligations are left.
Let the hedgies/private equity all rot; the price they paid for decades of grift in the absence of regulation.
