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mk · 3235 days ago · link · · parent · post: Why the oil crunch could be worse than the housing crisis
It seems the numbers were no larger: But this might be the bigger issue: CDO's might have assumed a few businesses to have issues making due, but not the whole sector.
Even more importantly, most oil-price hedges, price swaps/derivatives, also have cross-default provisions. Thus, counterparty credit risk begins to escalate as those parties are forced to disgorge cash payments on those instruments.
If there's a positive here, it's that maybe another derivative crisis would give us the chance at the reset that we opted not to pursue under the TARP. We need a radically differ et approach to financial regulation, but it won't happen without motive, means, and opportunity. A crisis Malay precipitate that.