Comment to: Time to Get Outraged by John Mauldin 9 June 2011

John,
The BIS (Bank for International Settlements) has been warning on this topic for a few years.  The truth is that at the heart of the crisis, has always and forever been the OTC Swaps market.  It’s why we can’t clear the various asset classes.  The “gap” is and has been unquantifiable—so the hole could not be plugged—no matter how much stimuli.  Probably the correct action in mid 2008 would have been to suspend trading of all OTC swaps, reverse all “naked” transactions, and establish exchanges for clearing post haste.  Once quantified and done, use RGE’ Monitor’s shortfall and plug the hole—then markets could have cleared and GDP could have recovered.  It’s as if Moses came down from the mountain and said” Let the corporations go bust, let the homeowners be foreclosed, let the unemployed starve, but at all costs save the swaps”.  This is what gave us not too big to fail, but “TOO Big to Bailout”