Time Bomb Ticking

Controlling Swaps' Risk Is Still Vexing - WSJ.com: "The latest problems of large U.S. banks are raising the same fears that gripped some markets in the fall. At issue: slow progress in solving the problem of counterparty risk in the credit-derivatives market.

On Friday, as the shares of Citigroup Inc. and Bank of America Corp. fell and nationalization fears drove down bond prices, the cost of insuring their debt from default rose to levels not seen since the height of the financial crisis last year. At the same time, an index that measures counterparty risk of global financial institutions rose to its highest level since Oct. 10. The index, run by Credit Derivatives Research LLC, reflects the cost of protecting the debt of banks and brokerages from default."

I think that is long form for UGLY.

This has not been solved yet and we are piddling about how much money to toss to the car companies. How many tax breaks.

We need clean banks to clean up the debt that can be cleaned. This is just eating capital now.