Derivatives, the weapons of mass destruction as Warren Buffett called them that nearly destroyed AIG last year, are still threatening the US financial system.
The Wall Street Journal reports that more than half the 100 companies surveyed reported so-called "risk-related contingent features" in their derivatives contracts in their first quarter filings.
Even more alarmingly, CFO.com reveals that 80% of the derivatives risk is concentrated in five banks: JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley.
In other words, the top financial institutions in the US still have AIG like exposures.
While Fitch welcomes the disclosure of derivatives risk, the worry is whether one of the banks will do an AIG. It's a time bomb.
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