$707,568,901,000,000: How (And Why) Banks Increased Total Outstanding Derivatives

http://www.zerohedge.com/news/707568901000000-how-and-why-banks-increased-total-outstanding-derivatives-record-107-trillion-6 ^

[DannyTN]

"The story, if true, is that Bank of America, that too-big-to-(let)-fail Zombie Bank of America, had moved $60 trillion of its credit default obligations over into its FDIC insured subsidiaries."

I believe that story is true. But that doesn't mean the FED owns them. BofA owns them, and BofA has to fail before the government gets involved.

The credit default obligations came from the failed Merrill Lynch. But the underlying credit obligation is Fannie Mae and Freddie Mac mortgages, which the government is basically on the hook for anyway, given that these were quasi federal agencies. Technically the government wasn't on the hook for them, but nobody ever believed that the government would let even a quasi federal agency fail, so they were.

So given that the government was on the hook for the mortgages in the first place, being on hook for the derivative products is not really an additional risk. And those mortgages are secured by real property.