As a practical matter, putting C into receivership would have approximately the same effects on the banking system as the BK of Lehman. Further systemic paralysis. And it's all because of the web of off balance sheet CDSs that banks and insurance companies sold thinking they were free money. Now these financial neutron bombs have turned many--not all--big banks into zombies. Left in place as zombies, the big banks will crumple as the oncoming waves of rate reset driven CDO defaults cause the CDS provisions to become payable.
The first step toward unlocking the banking system will be to put daylight on CDS contracts--all of them, in a searchable public database. Then watch the market action! We'd find out pretty quickly who's BK and who isn't.
The stress tests don't touch any of this, and are pure delaying tactics. The financial crisis has yet to be resolved.
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