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Entry: Faith-Based Economy Link: http://www.takimag.com/blogs/article/faith_based_economy#20707 Post contents: Joe Populist, The reason that Bear Stearns was sold for $2 (less the the price of its own building) is easy enough to figure out. Bear had <strong>$20 TRILLION DOLLARS</strong> worth of derivatives on its books. That's also why it cannot be allowed to fail. If Bear's derivatives had been dumped on the market, and marked as worthless, it would have ignited a chain reaction in all the other major banks and hedge funds who have soaked up similar "structured finance" garbage. Do you know how many derivatives there are out there? Upwards of <strong>$550 TRILLION DOLLARS</strong>. The market for over-the-counter derivatives is the largest financial bubble of all time. It dwarfs the value of the entire world's real estate. The failure of a mere 3% of derivatives would collapse the world financial system in hours. We had a preview of this back in 1998 when the Fed bailed out the LTCM hedge fund because it feared just that scenario of toppling dominos. Guess how many LTCMs there are out there today waiting to blow up. Greenspan and Wall Street learned nothing from that experience. They pushed forward and got the Depression era Glass-Steagall Act removed. That paved the road to this disaster. Sub-prime was only the spark. The great derivatives meltdown and the Crash of 2008 can't be that far away. Sent at: 2008 07 06