"At least $2.4 trillion worth of securities, that is $2,400 billion (€ 1.64 trillion) are at risk to the financial insurance monoline downgrades. This is the early phase of the most severe financial crisis the United States has faced in its entire history, vastly paling 1929. It is now inevitable that the US Federal government will soon be forced to enter the “financial guarantee” business, assuming the obligations of municipal bond from the “monolines” and mortgage-backed securities insurance."
Hundreds of US financial players – from small hedge funds to the major money center banks – with complex books of derivative trades, now have a very serious problem. Their “hedged books” contain supposedly offsetting risk exposures that were to have created a reasonable portfolio risk profile. The breakdown in Wall Street finance has transformed these highly leveraged “books” into essentially unmanageable “toxic waste” and financial land mines. The heart of the securitization process has been to make financial exposure less and less transparent. In good times, few cared. Now everyone cares. Banks dare not to trade with other banks fearing unknown risks.