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Understood that CDSs are for the most part casino bets on the failure of this or that. Many, including Fools, cryout to let C and BAC go insolvent, so that the good parts can be sold off to folks who can make mucho $$$ from them, and the bad parts be buried at taxpayer expense. Questions:
1) if C and BAC go insolvent, will this trigger $100B's in CDS payouts?
2) is it true that the bankruptcy of Lehman was the main trigger for current financial crisis, not because LEH paper became worthless, but because of the CDS's that bet on LEH going belly-up, trigger $100B's of CDS payouts by AIG that they could not really afford?
3) if #1 is true, then is it really true that some institutions are too big to fail, not because they are crucial, but because of the CDS payouts that will be triggered by their failure?
sorry if this is the wrong forum for this, but could not find a better spot.
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