Will Puerto Rico Cause An Inadvertent “Black Swan” Derivatives Melt-Down?

I really had not been paying much attention to the Puerto Rico debt situation. After all, $72 billion in debt that might go bad – big deal. The Fed can print up $72 billion in credit lines with the push of a button. --But a friend of mine happened to mention to me today (Monday) that MBIA’s stock was down over 23% and Assured Guaranty’s stock was down over 13%. That woke me up. --Companies like MBI and AMBAC underwrite credit “enhancement” guarantees on these massive cesspools of debt – and the associated derivatives that are “wrapped around” the debt structures – and stick them in VIEs.

Read more at Investment Research Dynamics
(Hat tip: KimR)