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Hi Full of Carp
I can't speak to the Credit Default Swaps, but what I've read is that the European Banks are greatly exposed to Italian National Debt and Greek National Debt etc. through their Bond purchases - greatly only needs to be enough to tip the Banks into insolvency - and as I understand it the fear is that the back wash of all this mess can indeed take down many of Europe's large Banks. I don't doubt the U.S. institutions you mention are exposed too.

What mystifies me is that the European Banks etc. had an infinity of opportunity to observe and rub shoulders with their Neighbors in Italy and Greece to note their political and economic realities, and still they continued to buy more Bonds at blue sky prices.

Having Insurance to protect ones self against a bad outcome is worthless if the Insurer has misjudged the Probabilities and goes Bankrupt himself.

Thank you too for commenting on these issues.
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