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The financial stocks are getting slaughtered. CFC is going bankrupt and WM to single digits, maybe even extinction. These financial institutions are marking to myth and hiding their derivate exposure. They are finally starting to leak out one by one how bad of shape they are in. Citi dumps their CEO, MER dumps their CEO. Morgan Stanley just announced a 2.5B write-down. You guys are kidding yourselves if you think Goldman is immune. They are going to get slaughtered. [img]/images/graemlins/grin.gif[/img]

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You do realize these "derivatives" are zero-sum and don't need to be accounted for in calculating net losses, right? It affects liquidity, for sure, but it has no relevance in determining solvency of the financial sector as a whole. If someone's sitting on a big loss on their derivatives position, someone else is sitting on a gain. Now, in a real liquidity crisis, things could change (you could have a scenario where losses are real but gains aren't due to counterparty's liquidity issues) but the fed isn't going to let fundamentally solvent entities go down due to things like that.

What's really great about this credit crisis is that it allows all these people who have no idea what ABS, MBS and CDO are, who have no idea what subprime actually means, who couldn't price bonds or model credit risk if their life depended on it, to suddenly decide that they can calculate what the totality of the losses for the financial sector will be and that certain financial institutions will go down, without having seen the actual positions of any of those firms or having any idea of what the universe of those "bad" bonds looks like.