I do think he wears them...at least reading ones. Don't know if this is just a painted image in my head, or something I actually picked up on from a post or, two along the way.
Before you call an old guy out to the Horse, though, keep in mind the saying: "A young man fights for his honor, but an old man fights for his life."
Here's some interesting weekend reading: the OCC's derivatives quarterly report.
The concentration is one of the TBIF's hostage-taking lines of defense against liquidation: "See, if you kill us, you'll kill the derivatives market!" My answer to that is to look on page 11 of that report: bumping along down along the zero line is the 4T or so of notional held by the users of derivatives. Everything else is the dealers' trading amongst themselves.
Not only is it possible to take any one of those guys out, it was done straightaway with Lehman. The triggering of the CSA's alone would take out a huge amount of it. Then you start forced novation; some of it has to be held in a "XYZ Holdings" entity, funded by the stock and bond holders, but before long, the offender is just a memory.
All you'd have to do is make sure there was enough NPV left to keep the end-users whole. Everyone else; let 'em squabble. Some banks would take earnings hits by illusionary or amortized earnings they might have to recognize as losses; that's the real reason they're afraid of it.
Would it cause systemic stress? Sure. You lay down with dogs, you get up with fleas. Would it implode the system as now constituted? Only if there is nothing to the banking system but its derivatives operations. And if that's really the case, the sooner that's down, the better for the system ultimately.
