Selling More CDS on Europe Debt Raises Risk for U.S. Banks - Bloomberg
U.S. banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish and Italian debt in the first half of 2011, boosting the risk of payouts in the event of defaults.
Guarantees provided by U.S. lenders on government, bank and corporate debt in those countries rose by $80.7 billion to $518 billion, according to the Bank for International Settlements. Almost all of those are credit-default swaps, said two people familiar with the numbers, accounting for two-thirds of the total related to the five nations, BIS data show.
This is amazing. US banks are going long on European debt by writing $500 billion in credit default swaps on it. The "too big to fail" US banks, having been told by Dodd-Frank that there is no more "too big to fail," are setting themselves up to demand another bailout if they have to pay gazillions to holders of European debt. This redefines the word "arrogance."