The obligations that were being traded in the expectation that the underlaying loans would possibly pay off were a form of Derivative. The first thing I learned about such instruments when I studied for a Series 7 license is that an Uncovered Call entails “Infinite Risk.” The instructor repeated that slowly to make sure that we all got it. If the value goes down then you can lose the principle invested but if it goes up and you are forced to buy the asset then there is no end to how much it might cost you. He also pointed out that by definition a “sophisticated investor” who is anybody worth over $1 million, is allowed to self destruct but poor widows and orphans are protected. The banks and governments here were not poor orphans. By paying off the foreign banks at 100% on the dollar Geithner effectively paid off their assumption of enormous risk. In effect the banks were granted a Put by the US government that they did not have to pay for.