Wall Street's Pre-Crisis Web of Contagion

“It is not enough to know your counterparty; you need to know your counterparty’s counterparty”

Sept. 15, 2008: Bank of America agrees to purchase Merrill Lynch for $50 billion

In March 2008, on the eve of the failure of Bear Stearns, the U.S. financial system was interlinked in dangerous ways, as this chart shows. The firms with the greatest concentration of arrows aimed at them are the most exposed to counterparty risk. It’s based on credit-default swap data compiled in an International Monetary Fund report released in 2009.

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